Asia’s standalone HDPE, PP margins slip further on feedstock

21 February 2011 08:05  [Source: ICIS news]

By Chow Bee Lin

(Recasts high density polyethylene in leading paragraph for clarity)

SINGAPORE (ICIS)--Asia’s standalone high density polyethylene (HDPE) and polypropylene (PP) plants’ margins have slid deeper into the red as the recent hikes in monomer feedstock prices were not matched by similar increases in the derivative polymer markets, industry sources said on Monday.

The benchmark weekly average spot prices of HDPE injection grade have risen by $25/tonne (€18/tonne) in China and $45/tonne in southeast (SE) Asia during the four weeks ended 18 February, but the weekly average spot ethylene prices had risen by $215/tonne in SE Asia and $75/tonne in northeast (NE) Asia over the same period, according to ICIS.

The benchmark weekly average spot prices of PP injection and yarn grades had risen by $35/tonne in China in the four weeks to 18 February, but the weekly average spot propylene price in NE Asia had risen by $100/tonne over the same period, ICIS data showed.

The steeper hikes in feedstock prices had pushed the variable margins of standalone HDPE and PP plants lower at minus $84/tonne and minus $27/tonne in the week ended 18 February, after hovering at negative levels of minus $76/tonne and minus $3/tonne the previous week, ICIS data showed.

A standalone HDPE or PP plant buys monomer feedstock from an external party, as against an integrated plant which produces monomers from its own upstream facility. A further erosion of their variable margins could lead regional standalone plants to cut operating rates, regional producers said.

HDPE and PP plants in NE and SE Asia that are integrated with upstream naphtha crackers still enjoyed positive variable margins last week, but even those producers could cut operating rates if the gap between spot monomer and polymer prices narrowed further, regional traders said.

An integrated plant typically had to price polymers $150-200/tonne above monomer feedstock to justify its resin production, regional producers said. Without these premiums, an integrated plant would eventually decide to produce more monomers at the expense of polymers, they added.

“We’re trying to maximise our ethylene margins now, but we’re also considering cutting our PE production in March,” an integrated PE producer said.

The benchmark HDPE film grade traded just $40/tonne above spot ethylene prices in NE and SE Asia last week, and the benchmark PP yarn grade was dealing at $105/tonne above spot propylene, ICIS data showed.

The weekly average prices of HDPE film grade were assessed at $1,360/tonne CFR (cost & freight) China and $1,370/tonne CFR SE Asia, and the average weekly PP yarn price was at $1,555/tonne CFR China for the week ended 18 February, according to ICIS.

The average weekly spot ethylene prices were assessed at $1,320/tonne CFR NE Asia and $1,330/tonne SE Asia last week, and the average weekly spot propylene prices were assessed at $1,450/tonne CFR NE Asia in the same week, according to ICIS.

($1 = €0.73)

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By: Chow Bee Lin
+65 6780 4359



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