FocusChina weak demand drives PE re-exports, prices seen low

17 June 2010 08:35  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--Asian and global traders are actively offering polyethylene (PE) for re-export from China - where demand is weak and inventory pressure is mounting - raising concerns that PE prices will continue downtrend, industry sources said on Thursday.

Most of the re-export offers were for Iranian material, Chinese traders said.

A significant increase in Iranian PE supply to China and Vietnam in the recent weeks had driven down regional prices, hence the re-exporting of the product had raised fresh concerns that prices could be under further downward pressure, Asian traders said.

LDPE film grade was last assessed at $1,280-1,350/tonne (€1,037-1,094) CFR (cost and freight) southeast Asia for the week ended 11 June, according to ICIS pricing. (Please see graph below)

The re-exports from China also indicated that Chinese demand was not absorbing the additional capacities that had come on stream in China and the Middle East over the past two years, the Asian traders added.

A key trader in east China sold 500 tonnes of low density PE (LDPE) film grade at $1,280/tonne FOB (free on board) China for prompt lifting to Taiwan, Vietnam and the Philippines.

In Vietnam, Iranian LDPE was offered at $1,300-1,320/tonne CFR (cost and freight) Vietnam for prompt re-export from China.

A Taiwanese PE producer said it had bought a few hundred tonnes of Iranian LDPE from traders last week to supplement its supply to the domestic market.

“We’ve cut LDPE production in favour of ethylene vinyl acetate (EVA) which is giving us higher margins,” the producer said. The producer has the option to switch between LDPE and EVA at its swing plants.

China imported 120,564 tonnes of high density PE (HDPE) and 20,100 tonnes of linear LDPE (LLDPE) from Iran in the first quarter of 2010, which are respectively 67% and 12% higher from the same period last year, according to China customs data.

Similarly, China’s LDPE imports from Iran in the same period rose sharply to 83,054 tonnes from 5,627 tonnes, the data shows.

The actual volume of Iranian PE available in China was more than what the import data was reflecting, as most importers were holding high stocks at the bonded warehouses while they looked for buyers, Chinese traders said.

Materials stored at bonded warehouses have not cleared customs and hence are not reflected in the import statistics.

($1 = €0.81)

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By: Chow Bee Lin
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