15 March 2010 12:35 [Source: ICIS news]
By Chow Bee Lin
SINGAPORE (ICIS news)--The China-South America polyethylene (PE) arbitrage window has opened but the opportunity is waning due to rising freight cost, traders said on Monday.
Re-exports to South America were currently yielding higher margins compared to sales in the China market, according to market sources.
Chinese traders who re-exported film grade high density polyethylene (HDPE) at $1,300/tonne FOB (free on board) China to Brazil last week had achieved the equivalent of $1,260/tonne CFR (cost and freight) China, a global trader said.
But they would have had to sell the same cargo below $1,200/tonne CFR China if they had placed it in the domestic market due to competition from lower-priced locally produced material, he said.
Film grade HDPE from a recently started up plant in south ?xml:namespace>
Cargoes offered for re-export from China to South America consisted of mainly film grade HDPE and film grade linear low density PE (LLDPE) originally imported from the Middle East or the US, but a rising freight rate was hampering re-export activities, the traders said.
China-South America freight for a 20-feet container was estimated at around $180/tonne this week, $30/tonne higher from last week, they said.
Chinese traders would try to pass on the additional freight costs but their buyers in South America would not readily accept it, they said, adding that freights from
Some traders thought the currently achievable prices for Chinese re-export to South America were not high enough to attract large volume from
LLDPE re-exported from
The CNY200/tonne difference in price was not good enough to compensate for the extra efforts needed to re-export a cargo, he said. “The documentation and the explanation (one needs to do) for the port custom for re-exporting a cargo takes up too much time.”
Uncertainty over the restocking cost also discouraged re-exporting activities, a third global trader said.
"We bought LLDPE from a
Discussions for re-exporting Middle East LLDPE from
Film grade LLDPE and HDPE were assessed at $1,300-1,390/tonne CFR China and $1,220-1,320/tonne CFR China respectively for the week ended 12 March, $10-40/tonne lower from the previous week, according to global chemical market intelligence service ICIS pricing.
PE prices in
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