December Polyolefin Price Rises Flounder

“I am so happy to be supporting polyethylene film pricing”….


Source of picture: Canada-China Agriculture and Food Development Exchange


By John Richardson

IT looks as if attempts by polyolefin producers to raise prices for December deliveries have, as we predicted last week, been largely unsuccessful.

Some grades of polypropylene (PP) edged up by $10-20/tonne but polyethylene (PE) across all grades remained unchanged, according to last Friday’s assessment by ICIS pricing,

What’s highly curious is that while our colleagues report that the production cuts by Sinopec and rising feedstock costs had pushed up PP, the same wasn’t the case in PE.

The blog will be attending the Gulf Petrochemicals and Chemicals Association (GPCA) conference in Dubai this week and so shall endeavour to dig out the reason for this disparity.

The slight improvement in PP is unlikely to have done much to compensate for the sharp rise in raw-material costs.

And the latest edition of the ICIS pricing Asian PE margin report illustrates the ground that was lost last week.

Click here for pricing and margin graphs – PricingMarginGraphs6Dec2010.ppt

Integrated PE margins fell, for example, by $60/tonne on a 4.3% rise in feedstock costs and after a $55/tonne fall in stand-alone margins, these high-cost producers will be struggling to cover fixed costs.

The fourth quarter started with a roar with November volumes exceptionally strong, some producers and traders had claimed.

One spurious argument was that this was a peak demand season, driven by strong pre-Chinese New Year (CNY) sales.

But other than the usual kick to demand provided by the agricultural film season for low-density polyethylene (LDPE) and linear-low density PE (LLDPE0, we feel that markets were being talked-up to try and compensate for stronger raw-material costs.

End-users are bound to continue to feel nervous at the moment with more interest rate rises quite possibly on the cards in China very soon and reports that the property market could be weakening.

Polyolefin supply will increase as production is increased at plants that have suffered from technical problems and delayed start-ups.

Our fellow blogger, Paul Hodges, also makes the very interesting point that refineries might have more naphtha available to dispose of into petrochemicals as a result of the diesel short ages in China (part of the reason for the Sinopec production cuts) and Europe.

Refineries are running harder at the moment to tackle lack of diesel.

As a result, petrochemical producers might be tempted, or perhaps even required in order to maintain internal balances, to run harder as more naphtha is also produced.

This year was probably better than anyone even dared to expect, but almost every day it seems as if the challenges for 2011 are multiplying.

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