FocusAsian LLDPE prices spike; value gap with HDPE at all-time high

13 April 2010 10:27  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Prices of linear low density polyethylene (LLDPE) have spiked by as much as 20% in Asia over the past six months, primarily due to supply shortage stemming from maintenance turnarounds and outages at major polymer facilities, industry sources said on Tuesday.

This led to the widening of the price gap between LLDPE and high density PE (HDPE) to an all-time high of more than $100/tonne (€74/tonne), against the usual range of $20-30/tonne, based on data from global chemicals market intelligence service, ICIS pricing.

This price gap may not narrow anytime soon, market players said.

LLDPE prices in India steadily climbed from $1,170/tonne CFR (cost and freight) in mid October 2009 to $1,410/tonne on 9 April, due to tight supply against growing demand, ICIS pricing data showed.

HDPE prices - at $1,300/tonne CFR on 9 April - also increased, but to a smaller degree over the same period, given slowing demand and high inventory, market players said.

In China, HDPE firm prices jumped at half the speed of LLDPE prices, which registered a 15.7% growth from mid-October to $1,325/tonne CFR China last Friday. HDPE film values were at $1,220/tonne CFR China last week, $105/tonne lower than LLDPE prices, according to ICIS pricing.

Demand for HDPE film grade was being dampened by mounting environmental concerns over the use PE bags, market players said.

HDPE film is thicker than LLDPE and is used mainly to make shopping bags and for food, drink and cosmetic packaging.

LLDPE film, on the other hand, is used as a liner in shrink wrap, and for drip irrigation.

“Inventories of HDPE in India are quite high among traders, whereas LLDPE is extremely short,” said a Mumbai-based trader.

LLDPE demand, particularly from the agricultural and packaging segments, had been on the rise, suppliers and end-users said.

“The season for drip irrigation, where LLDPE is widely used, is well under way,” said a supplier.

An end-user reported that he was finding it very hard to find LLDPE film to line his polypropylene (PP) raffia bags, which were in high demand.

Shortage of low density PE (LDPE) also whetted the demand for LLDPE, as converters increased the proportion of LLDPE in their processing mix.

Last year, demand for LLDPE in India had been stronger at 16-17%, compared to the 12-13% demand growth for HDPE, said a supplier.

A prolonged shutdown at the polymers facility of Haldia Petrochemical, as well as the ongoing turnaround at Gail India’s plant and at the PE plants of Reliance Industries had significantly dented LLDPE supply in the region.

The situation was unlikely to improve much until late May, as Reliance has plans to shut down another plant by the end of the month for a two-week turnaround, traders said.

The LLDPE shortage, meanwhile, was prevalent on a global scale due to intensifying shortage of butene – a key ingredient for LLDPE manufacturing.

“The shortage is mainly a result of a switch by US refineries to lighter feeds, which produce less butene,” an industry source said.

Swing plants could not just switch to producing more LLDPE and manufacture less HDPE to ease the supply constraints because of this, industry sources said.

Rising LLDPE prices in south America due to a dearth of US cargoes prompted South Korean producers to divert their cargoes into that region.

LLDPE prices were at 87.54-92.08 cents/lb DEL (delivered) in Argentina last Friday, up 6.3-6.8/lb from the previous month, according to ICIS pricing.

Availability of US cargoes was also scant in China, with the US suppliers pushing for price increases in their domestic market.

US LLDPE prices had risen to 74-77 cents/lb, up 6 cents/lb from a month earlier, according to ICIS pricing.

($1 = €0.74)

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By: Prema Viswanathan
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