FocusWeak crude oil prices may hit Asia’s September PE prices

24 August 2010 06:34  [Source: ICIS news]

By Chow Bee Lin

Polyethylene (PE) bagsSINGAPORE (ICIS)--Weak crude oil futures over the past week may hinder Asian and Middle Eastern producers’ efforts to raise polyethylene (PE) prices for September shipments, industry sources said on Tuesday.

PE producers were concerned that poor upstream crude oil prices might fuel strong buyer resistance to the proposed hikes because regional PE importers typically shy away from the market when crude oil values dip, according to several northeast Asian PE producers.

Most Middle East producers had not announced their September offers to the market, but some producers in northeast and southeast Asia had been testing the market by offering film grade high density PE (HDPE) at $1,200-1,210/tonne (€948-956/tonne) CFR (cost and freight) China for September shipment, which were about $40/tonne higher than last week’s discussion levels.

Film grade HDPE was assessed at $1,120-1,170/tonne CFR China and $1,140-1,170/tonne CFR southeast Asia (SE Asia) for the week ended 20 August, according to ICIS.

September HDPE offers had attracted limited buying interest mainly due to persistently weak crude oil futures over the past one week, which caused many buyers to say that PE prices could fall in tandem, another northeast Asian producer said.

One Japanese trader had taken a September position for HDPE film at $1,200/tonne CFR China, but most other Asian traders would only accept that price if they had to cover back-to-back deals, a number of Asian traders said.

Several northeast Asian producers had been offering film grade linear low density PE (LLDPE) at $1,200-1,220/tonne CFR China since last week for September shipment. However, deals were cited at the low end of the range, which were unchanged from August transactions.

Film grade LLDPE was assessed at $1,150-1,200/tonne CFR China and SE Asia for the week ended 20 August, according to ICIS.

There was speculation that a global producer might offer non-dutied LLDPE from its Singapore plant at $1,250/tonne CFR SE Asia for September shipment, about $50/tonne higher from last week’s discussions.

Higher LLDPE offers would likely meet with strong buyer resistance as most importers were expecting PE prices to fall in tandem with crude oil prices, a southeast Asian plastics processor noted.

However, Asian producers were expected to have fewer difficulties in raising prices for film grade LDPE as the supply of this grade had been tight in recent months due to planned and unscheduled plant shutdowns in Asia and the Middle East, Asian traders said.

Film grade LDPE was assessed at $1,320-1,380/tonne CFR China for the week ended 20 August, about $40-50/tonne higher than the previous week, based on ICIS data.

Meanwhile, most Middle East and Asian PE producers were expected to announce their September offers to the market this week.

($1 = €0.79)

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By: Chow Bee Lin
+65 6780 4359



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