OUTLOOK '11: China PE, PP may rise in end-February on restocking

30 December 2010 08:22  [Source: ICIS news]

Chinese lanterns to welcome Lunar New Year. PE, PP trades in China will slow from mid-January ahead of the week-long Lunar New Year festivities on 2-8 February.By Chow Bee Lin

SINGAPORE (ICIS)--China’s polyethylene (PE) and polypropylene (PP) import prices are expected to rise at the end of February on the back of restocking activity and high feedstock costs, industry sources said on Wednesday.

Chinese traders and end-users may refrain from buying for a month from mid-January because of the Lunar New Year holidays, market sources said.

The Chinese markets would be closed on 2-8 February for the Lunar New Year celebrations. After which, restocking of polyolefins would begin, possibly pushing prices higher.

Meanwhile, high production costs due to recent spikes in crude values may also prompt PE and PP producers to nudge up prices, traders said.

Light sweet crude for February was at above $91/bbl (€69/tonne) at noon on Thursday.

There was a widespread belief that high production costs would dominate the price discussions for plastics next year, traders said.

China’s importers would face a relatively tight PP supply upon returning to the market in end-February, as a number of major plants in Asia and the Middle East would be shut for scheduled maintenance at that time, market sources said.

India’s Reliance, Saudi Arabia’s Saudi Polyolefins and Kuwait’s Petrochemical Industries Co (PIC) have scheduled plant maintenance in February or March.

In April, Saudi Arabia’s PetroRabigh and South Korea’s Polymirae also have scheduled plant turnarounds, which would tighten the export supply to China in March, traders said.

These producers were likely to reduce export volumes in the run-up to the plant shutdown, they added.

However, some Chinese importers were not so worried about a supply crunch, as they were expecting high volumes from new PP plants that were recently started up in China and the Middle East to hit the market from the first quarter of 2011.

Around 1.55m tonnes and 1m tonnes of new PP capacity were started up in the Middle East and China, respectively, in the second half of this year, according to ICIS data.

Supply of film grade low-density PE (LDPE) was expected to remain tight in Asia next year as many regional producers had switched to more lucrative products such as coating-grade LDPE or ethylene vinyl acetate (EVA), regional buyers and sellers said.

There were concerns that a lack of capacity addition in China and the Middle East in the first three quarters of next year could also mean tighter supply of linear low-density PE (LLDPE), while demand was expected to grow at a steady pace next year, they said.

Supply of different high-density PE (HDPE) grades such as film, injection and blow moulding were expected to be in abundance because of ample domestic production, Chinese traders said.

China’s PE consumption in 2010 was estimated to comprise 3.5m tonnes of LDPE, 7.7m tonnes of HDPE and around 6m tonnes of LLDPE, up by 2.8%, 13.7% and 26.8% from last year, respectively. Its PP usage during the same period was estimated at 14.6m tonnes, up by 9.9% year on year, according to industry estimates.

($1 = €0.76)

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By: Chow Bee Lin
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