FocusChina PE, PP price direction hinges on crude movement

12 July 2013 07:38  [Source: ICIS news]

By Chow Bee Lin

China PE, PP price direction hinges on crude movementSINGAPORE (ICIS)-- China’s polyethylene (PE) and polypropylene (PP) import prices will likely track crude movement in the coming weeks, with no strong impetus from the domestic market to pull polyolefin prices in a definite direction, industry sources said on Friday.

Spot prices of the benchmark linear low density polyethylene (LLDPE) were hovering at around $1,410-1,440/tonne (€1,072-1,094/tonne) CFR (cost and freight) China, while PP flat yarn spot prices were being quoted at $1,425-1,450/tonne CFR China this week.

On 5 July, LLDPE import prices were at $1,412.50/tonne CFR China while PP flat yarn resins stood at $1,420/tonne CFR China on average, up 1.3% and 0.4% from four weeks ago, according to ICIS data.

Without a significant cost push, suppliers will not be able to raise resin prices amid prevailing weak downstream demand, Chinese traders said.

Higher crude futures prices could drive up resin prices amid tight supply of domestically produced resins in China, they said.

At midday, US crude was trading at $104.85/bbl while BRENT crude was at $107.68/bbl, largely unchanged from Thursday’s close.

Supply within China has been tight since May, as most production facilities have been running at low operating rates as a result of squeezed margins, market sources said.

In May, a number of plants were taken off line for annual maintenance, industry sources said.

Fresh supplies from new capacities coming on stream in China are only expected to hit the market in September and October, traders said.

Wuhan Petrochemical is starting up its new 300,000 tonne/year high density PE (HDPE) and 300,000 tonne/year LLDPE plants around mid-July.

In Liaoning province, Fushun Petrochemical is expected to restart its PE plants in the second half of July and this may help ease the strong upward pressure on prices, market sources said.

Fushun Petrochemical’s PE facility consists of a 490,000 tonne/year high density PE (HDPE) unit and a 450,000tonne/year LLDPE/HDPE swing plant.

Supply of low density PE (LDPE) has been particularly tight in China because of a sharp fall in exports from Iran in recent months, they said.

Some Chinese traders believe that even if the PE and PP import prices are driven higher by stronger crude futures prices, gains would be limited as some local PE and PP producers are expected to raise operating rates at their plants as soon as margins improve.

($1 = €0.76 / $1 = CNY6.14)

Additional reporting by Angie Li, Doreen Zhao, Amy Yu

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Chow Bee Lin
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