Price and market trends: Asia LDPE prices rise on Thai force majeure

26 July 2013 08:44  [Source: ICB]

A force majeure at Thailand's PTT Global Chemical's plant has led to higher prices across the region

Spot low density polyethylene (LDPE) prices in southeast Asia and China rose the week ended 19 July on tighter supply, following a force majeure declared by Thailand's PTT Global Chemical on supply of the polymer, industry sources said.

 Food products at a Thai market are packaged with LDPE

Copyright: Rex Features

PTTGC declared a halt on LDPE supply on 17 July as its 300,000 tonne/year LDPE plant in Map Ta Phut, Thailand, was taken off line in the middle of the week ended 12 July, and is expected to be down for more than three months, according to a source close to the producer.

In Indonesia, imported LDPE coating and film grades were offered at $1,850/tonne (€1,406/tonne) delivered (DEL) and $1,650-1,680/tonne DEL in the domestic market the week ended 19 July, $40-80/tonne higher from the prior week, local distributors said.

Malaysia-based LDPE producer Lotte Chemical Titan had increased its LDPE film grade offer to $1,600/tonne CFR (cost & freight) Indonesia for August shipment, up by around $50/tonne from its offer announced at the end of June, an Indonesian distributor said.

LDPE supply in southeast Asia is expected to tighten further, as Malaysian producer Petlin is scheduled to shut its 255,000 tonne/year plant in Terengganu in the third quarter for maintenance, the Indonesian trader said.

Petlin is expected to reduce its export allocations for August shipment in preparation for its plant turnaround, the Indonesian distributor said.

IMPACT ON CHINA PRICES
Offers for Asian and Middle Eastern LDPE grades have risen by around $20/tonne in the week ended 19 July to $1,490-1,500/tonne CFR China, Chinese ­traders said.

PTTGC had approached some Chinese traders after its plant outage, looking to buy back some of its LDPE cargoes at $1,560/tonne FOB (free on board) China, a Chinese trader said.

China's supply of LDPE from overseas has tightened since April, with less Iranian cargoes being shipped out to the northeast Asian country, Chinese traders said.

Iran is the top LDPE exporter to China since 2010. The Middle Eastern country accounted for 25% of China's LDPE imports in the first half of 2013, with a full-year 2012 share of 27%, official data showed.

Thailand, on the other hand, has a 6.3% share in China's LDPE imports in January-June 2013. Last year, Thai LDPE accounted for 6.4% of China's overall imports of the polymer.

Compared with previous corresponding periods, Thailand's LDPE exports to China in the first half of this year and in 2012 were up by 59.6% and 67.7%, respectively, China Customs data showed.

South Korea, Saudi Arabia and Qatar are also among the major LDPE exporters to China.

WEAK DOWNSTREAM DEMAND
Any further increase in China's LDPE import prices, however, might be moderated by continued weakness in downstream demand, Chinese traders said.

"The import prices have been rising because of the tight supply. Many Chinese buyers are likely to resist any further price hikes," a Chinese trader said.

In the four weeks ended 12 July, LDPE import prices in China rose by $20/tonne, according to ICIS.

Most of the recent LDPE price hikes were driven by rising costs of feedstock ethylene, and not by improving downstream demand, another Chinese trader said.

Any upward price pressure may not last because Iran's LDPE export supply may increase in the coming weeks, a third Chinese trader said.

The unplanned shutdown at PTTGC's LDPE plant is also expected to exert upward pressure on prices in India, as supply will likely tighten across the region.

"Definitely the plant closure will impact the LDPE market in south Asia. Expect prices to go up," a Mumbai-based trader said.

"If China and neighbouring markets are short, they will target producers supplying to the Indian market. Overall, supply will be tight," said another trader.

Another Mumbai-based trader also reported higher sales enquiries for LDPE lamination material during the week ended 19 July.

South Korea's Hanwha Chemical may export more LDPE film and coating grades to Asia in the coming months if regional prices rise further amid tight supply, a company source said on 19 July.

"We typically produce more wire and cable and ethylene vinyl acetate resins at this time of the year because domestic demand is good in this summer period," the source said.

But the producer may consider increasing its production of LDPE film and coating grades if the prices of these resins increase sharply in Asia, he said.

Additional reporting by Angie Li and Muhamad Fadhil


By: Chow Bee Lin
+65 6780 4359



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