Low-priced Iran LDPE in China exerts pressure on Africa imports

24 May 2012 11:26  [Source: ICIS news]

LDPE film is used in food packagingLONDON (ICIS)--Middle Eastern low density polyethylene (LDPE) offers into Africa in June could be under heavy downward pressure because of low-priced Iranian imports in the key market of China, sources said on Thursday.

By Friday last week, Iranian-origin LDPE was being sold in China at $1,200-1,210/tonne (€960-968/tonne) CFR China.

Early June LDPE offers into Africa from the Middle East have been announced at $1,490-1,500/tonne CFR Egypt. Early May offers were higher by up to 12% at $1,550-1,700/tonne CFR Egypt.

Ample supply of LDPE in China and the keen prices for Iranian origin cargo is expected to force Middle East producers to lower export offers to stay competitive.

"Because of what is happening in Asia, we have reduced prices in Africa. There is good stock at southeast Asian converters and good supply from producers," a Middle East producer said. 

China is a key importer of Middle East LDPE imports, and a price reduction in the country has a domino effect on import offers into Africa.

"If there are low prices in Asia, Africa asks for lower offers as well. Nothing is a secret anymore," the Middle East producer said.

The reduction in LDPE offers into Africa is sharper than for other polyolefin grades, said a second Middle East producer.

"We reduced LDPE prices as China is very weak because of a lot of Iranian cargo," the source said.

However, the source denied any direct presence of Chinese re-exports of Iranian material in Africa.

African demand for LDPE is slow as buyers wait for the remaining Middle East producers to announce June offers, which are expected within a week.

Other factors exerting downward pressure on African LDPE prices include an ongoing fall in crude oil futures, and naphtha and spot ethylene prices in Asia.

Additionally, low demand for the grade in Africa has been capping prices in the medium-term.

Africa is a net importer of LDPE, especially from the Middle East.

($1 = €0.80)

Additional reporting by Chow Bee Lin

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

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