FocusChina’s PE prices may remain stable until end September

01 September 2010 09:11  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS)--China’s polyethylene (PE) import prices may remain stable or fluctuate within $10-20/tonne range for at least until the end of September as the impact of weak downstream demand is off-set by tighter import supply, industry sources said on Wednesday.

Film grade low density PE (LDPE) and linear LDPE were assessed at $1,320-1,400/tonne (€1,043-1,106/tonne) CFR (cost and freight) China, and $1,170-1,210/tonne CFR China, respectively, for the week ended 27 August, $10-20/tonne higher from the previous week, according to ICIS.

Film grade high density PE (HDPE) was assessed at 1,120-1,170/tonne CFR China for the same week, unchanged from the previous week, ICIS data shows.

Downstream demand had been weak as many plastics processors had to shut their factories for maintenance, as part of the country’s move towards reducing its carbon emission target, Chinese traders said.

Restrictions on electricity consumption aimed at achieving China’s carbon emission target had also forced many local plastics processors to run at low rates, they said.

Despite the weak demand, PE import prices had remained largely stable in the past two weeks as most suppliers from the Middle East and Asia were not over stocked and hence did not have to cut prices to entice buying interest, they added.

“Some Middle East producers said their PE supply was curtailed by a shortage of ethane gas,” a key importer in north China said.

The tight supply was most acutely felt in the LDPE sector and the shortage was caused by a lack of capacity additions in the Middle East and Asia since mid 2008, an Asian LDPE producer said.

The shortage of LDPE supply was exacerbated by scheduled and unplanned maintenance shutdown of plants in Asia in the recent months, the LDPE producer said.

Regional LDPE plants which had shut down recently due to technical issues include Malaysia’s Titan Chemical and Petlin, and Qatar’s Qatar Petrochemical Co.

The scheduled maintenance of South Korean producers such as Honam Petrochemical in September and the unexpected shutdown of ExxonMobil’s plant in Singapore in July and August also affected regional LLDPE supply, an Asian trader said.

“The tight LLDPE import supply is not having as much impact on China’s import prices as it used to because Chinese buyers can fall back on local supply. But the tight supply did prevent the import prices from falling,” said a second trader in east China.

Downstream plastic packaging and agricultural film processors were expected to ramp up production when they return from a week-long national day holiday due from 1 October, as they prepare to meet the year-end local and export demand, Chinese traders.

“The restriction on electricity consumption and factory maintenance aimed at reducing carbon emission should be over by then,” said a trader in south China.

($1 = €0.79)

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By: Chow Bee Lin
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