First US-China PP arb this year opens on weaker US prices

29 October 2010 04:23  [Source: ICIS news]

SINGAPORE (ICIS)--The first US-China polypropylene (PP) arbitrage window for the year has opened as a result of weaker US domestic prices, Chinese traders said on Friday.

Two US-based traders had sold 5,000 to 6,000 tonnes of US block copolymer PP at $1,420-1,430/tonne (€1,022-1,030/tonne) CFR (cost and freight) China, LC (letter of credit) 90 days, for end-November shipment, Chinese importers said.

Block copolymer PP from northeast Asian and Middle East producers had been sold at $1,400-1,480/tonne CFR China for November shipment.

PP injection and yarn grades were offered at $1,400-1,410/tonne CFR China for December shipment, but these attracted no buying interest, as bids were lower at $1,360-1,370/tonne CFR China, they said.

High propylene feedstock prices in the US since late last year had made US PP export uncompetitive in the China market, and hence the US-China arbitrage window had been firmly closed until now.

Some importers in Asia expressed concerns that the opening of the arbitrage window, after a long lapse, would cause regional PP prices to come under downward pressure in the next two weeks.

US origin PP and polyethylene are exported to China in small volumes on a regular basis, but when they are offered in large quantities for delivery around the same time, they tend to exert downward pressure on regional prices.

An Asian producer said he was not surprised that the arbitrage window had opened at this time, because US PP producers typically seek export outlook to clear stocks before their financial accounting closes at the end of the year, to avoid paying inventory tax.

US bulk copolymer PP was assessed at 72.50-75.50 US cents per pound (CTS/LB) delivered for the week ended 22 October, 1.50 CTS/LB lower from the previous week, according to ICIS.

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By: Chow Bee Lin
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