Updated to mid-August 2009
Asian market review by Chow Bee Lin, ICIS pricing
Asian low density polyethylene (LDPE), linear low density polyethylene (LLDPE), high density polyethylene (HDPE) film/HDPE blow grades prices rose by 5.4-12.6% on average from around $1,050-1,210/tonne CFR (cost and freight) China/SE Asia (southeast Asia) in mid-May to around $1,160-1,320/tonne CFR China/SE Asia in mid-August.
Prices started rising in early June on the back of strong crude and upstream ethylene values, and rose consistently throughout the month. Persistently strong crude values pushed prices higher through July and the first half of August, although the rises slowed.
European market review by Linda Naylor, ICIS pricing
LDPE availability has tightened considerably in Europe in the three months to mid-August. Supply has been reduced and demand has improved, leading to significant price hikes. Strong export activity in May and June also supported European sellers who gained better netbacks selling to Asia than to the European market.
July PE prices rose by €100/tonne, while August saw a more modest rise of €30/tonne. PE producers were predicting more hefty hikes for September as supply was expected to remain restricted and demand steady.
In spite of the improved demand during the summer months in Europe, year-to-date PE volumes were still down by 10% when compared with 2008. Figures showed a record low inventory level, however.
Sources generally expected September prices to rise, but some downturn was expected in the fourth quarter as new capacities arrived on the scene.
US market review by David Barry, ICIS pricing
US polyethylene (PE) producers enjoyed robust margins during the May-August period as export business to Asia thrived and US inventories remained low. Price increases of 5-6 cents/lb were implemented in May and June as exporters shipped record volumes.
Producers announced additional hikes of 8 cents/lb for July, but the increase proposals were quickly split into 4 cents/lb increments for July and August. The July increase initiative failed to gain traction because export activity was beginning to taper off and feedstock costs dropped. Many domestic customers also pre-bought in June, resulting in very slow demand during the first few weeks of July.
Market participants were watching to see how quickly the opening of new PE plants in the Middle East would drive down US exports. Factors cited in this year’s US PE export boom included surprisingly strong demand in Asia’s emerging economies, the cost advantage of ethylene produced by US Gulf light-feed crackers versus naphtha crackers in Asia and Europe, and a series of project delays in the Middle East.
Latin America market review by George Martin, ICIS pricing
During the May-August period, PE prices in Latin America exhibited a slow but steady recovery, following gains in crude oil and feedstock ethylene prices.
The recovery pace was faster in Brazil than in any other Latin country, but it must be remembered that Brazilian prices include a tax called PIS/Cofins that adds about 9.5% on average to all prices.
Colombian production continued to be impacted by technical problems at its LDPE units. Colombia had removed import tariffs for LDPE starting 1 January and reduced LLDPE and HDPE tariffs to 5%. With many currency revaluations versus the US dollar, PE prices in Colombia moved up steadily.
Chile’s prices were moderated by competition from Asia and the US Gulf that kept prices from regional producers from going up too quickly.
Although PE prices showed some gains in Mexico, the rebound was modest because Mexico has tariff-free imports from the US to keep domestic price aspirations in check.
Venezuelan prices have been steady at high levels throughout 2009 due to a fixed exchange with the US dollar and long inventories of high-priced material in the hands of the local producer. Venezuelan transformers continue to pay the highest prices in the continent.
The above-described scenarios described the behaviour of LDPE in the region, but apply also to LLDPE and HDPE.
Webinar - Understanding Polyethylene Margins
To understand the margin and cost curve analysis behind the Asian polyethylene market and the methodology of our data collection, click on the link to view and listen to the archived version of the presentation.
If you would like to request a sample copy of ICIS pricing's Asia Polyethylene Margins report, please click here.
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