Asian LDPE re-exports cause $60/tonne price drop in southern Africa

22 June 2011 13:55  [Source: ICIS news]

LONDON (ICIS)--Increased availability of low-density polyethylene (LDPE) film re-exports from southeast Asia has resulted in a price decrease of $60/tonne (€41/tonne) in southern Africa, market sources said on Wednesday.

For the week ended 17 June, LDPE prices had fallen by 6.63-8.13% in China and 5.78-8.38% in southeast Asia from a month ago, to $1,470-$1,550/tonne and $1,530-1,630/tonne CFR (cost and freight) respectively.

Meanwhile, prices in southern Africa had fallen only by around 1% to stand at $1,780-1,820/tonne CFR for the week ended 15 June, leading to a wide price gap of $310-270/tonne between product in the region and those seen in Asia.

Although the arbitrage window opened in March, which is when the gap between prices in Asia and in southern Africa began to widen, the increasing interest to buy from the region is recent, leaving southern Africa prices $60/tonne lower this week at $1,720-1,820/tonne CFR.

“We are receiving cheaper offers from all over Asia; from China, from Vietnam. We have bought 500 tonnes at $1,700/tonne,” said a distributor in southern Africa.

LDPE film prices in China have been falling faster than in southern Africa, opening the arbitrage window between the two regions

"We are assuming there is lots of LDPE lying around in southeast Asia and they are dumping material here," another distributor said, adding that it had received offers at $1,540/tonne for 200 tonnes but refrained from buying: "The price sounds too good to be true, but also, we have enough material for the month."

"We were offered LDPE at $1,720/tonne from Asia and we bought the material," a third distributor said.

Despite distributors stocking up on cheaper product from abroad, they are quick to agree that demand in southern Africa remains low, as buyers wait for a further decrease amid the global downturn.

"Inconsistency and supply problems [surrounding product from] China are a fear," said a converter, adding that the presence of lower priced Chinese product could put pressure on local producers in southern Africa to reduce their offers.

($1 = €0.69)

For more on LDPE visit ICIS chemical intelligence

By: Cuckoo James
+44 (0) 208 652 3214

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