Sinopec may cut May PE output on squeezed margins – source

15 April 2011 08:30  [Source: ICIS news]

SINGAPORE (ICIS)--China’s petrochemical major Sinopec may cut its polyethylene (PE) output by around 10% in May as persistently low domestic prices coupled with high international crude prices have cut into its margins, a source close to the company said on Friday.

Sinopec was not immediately available to comment.

Based on Sinopec’s estimated average monthly PE output of around 300,000 tonnes in the first quarter of this year, the producer will lose around 30,000 tonnes of PE in May if its output is cut, according to Chemease, an ICIS service in China.

Any production cut by Sinopec is unlikely to cause prices to rise sharply, unless other local producers reduce their output too, local traders said.

"But given the current weak demand, any production cuts would be seen as a positive development,” a trader in east China said.

Local retail PE prices rose yuan (CNY) 50-250/tonne ($8-38/tonne) this week, with most of the gains made early in the week when crude prices strengthened. However, transactions were limited because of weak downstream demand, local distributors said.

Locally produced film grade linear low density PE (LLDPE), high density PE (HDPE) and low density PE (LDPE) were trading at CNY10,900-11,250/tonne, CNY10,700-11,350/tonne and CNY13,100-13,850/tonne on Thursday, all on an EXWH (ex-warehouse) basis, according to Chemease.

($1 = CNY6.53)

Additional reporting by Amy Yan, Li Ye and Moon Chen

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By: Amy Yu

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