FocusAsia PE, PP markets jittery; further price fall looms

02 October 2009 06:00  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--The expected injection of more supply into the Asian markets may depress regional prices of polyethylene (PE) and polypropylene (PP) well into November and December, industry sources said on Friday.

Many importers were unwilling to take October cargoes while some international resin producers began pricing cargoes on arrival basis to entice buying, traders said.

Recent plant start-ups in China and Saudi Arabia between May and September may cause a deluge of supply into the market, they said.

The benchmark PP injection and yarn grades have fallen 9.8% in China and 9.6% in southeast Asia in the four weeks ending 25 September, according to global chemical market intelligence service ICIS pricing.

The benchmark film grade high density PE (HDPE) fell 8.6% in China and 7.4% in southeast Asia over the same period, based on ICIS pricing data.

“PP prices may stabilise for a while in October due to restocking activities, but are expected to fall further in November and December as more of the new capacities come into the market,” a northeast Asian PP producer said.

Fujian Refining and Petrochemical Co (FREP) has a new 800,000 tonne/year polyethylene (PE) unit and a 400,000 tonne/year polypropylene (PP) unit, while Dushanzi Petrochemical's new facilities comprise a 550,000 tonne/year polypropylene (PP) plant and a 900,000 tonne/year polyethylene (PE) plant.

In Saudi Arabia, PetroRabigh operates a 900,000 tonne/year PE plant and a 700,000 tonne/year PP plant.

“PP prices are likely to stabilise for a while when China returns from the holidays, but are likely to fall again around mid October as supply from Dushanzi Petrochemical’s new plant is expected to hit the market in the second half of October,” a trader in east China said.

PP injection and yarn grades from FREP’s plant were already offered in east China at around CNY8,900-9,000/tonne ($1,303-1,318/tonne) delivered, the east China trader said.

The China market is closed on 1-8 October for the National Day celebrations.

Near-prime film grade HDPE and linear low density PE (LLDPE) from PetroRabigh’s plant were offered at $1,070-1,080/tonne CFR (cost and freight) China and $1,110/tonne delivered in Malaysia last week, Asian importers said.

Another potential downside was the prospect of US exporting more PE to Asia, the Middle East producer said.

“Low natural gas prices and weak PE demand at home may push US PE suppliers to export more to Asia in the fourth quarter,” he said.

“PE prices in Asia may fluctuate in the $900-1,000/tonne (€621-690/tonne) CFR China range by the end of the year,” he added.

Importers in southeast Asia could push back their December purchases to January to take advantage of the new zero-duty policy for intra-ASEAN (Association of South East Asian Nations) trade, and that could exert further downward pressure on regional prices, traders said.

The zero-duty policy adopted by the ten ASEAN member countries, namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, is expected to take effect from early 2010.

($1 = €0.69 / $1 = CNY6.83)

For more on PE, PP visit ICIS chemical intelligence
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By: Chow Bee Lin
+65 6780 4359



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