By John Richardson
NORTHEAST Asian polyethylene (PE) exports to China fell by 34% in January-August this year compared with the same period in 2010 as Middle East shipments surged by 60%, according to Global Trade Information Services - click here for a graph:
Exports from the North America Free Trade Agreement (NAFTA) region, which includes the US and Canada, were also down very sharply - by 47%.
The Middle East has been able to aggressively discount because of its cost position, thereby gaining market share in a market where overall volumes are down, we surmise.
Middle East production is up this year due to stabilisation of production at plants that were brought on-stream in 2008-2010. This has left the region in a position where it has to chase higher sales.
The Northeast Asians, particularly, the South Koreans, have increasingly targeted Latin America over the last few months in an effort to partially compensate for the weakness in China, the blog was told.
The Middle East, too, has entered Latin America in a bigger way. One major producer is reportedly moving 5,000-8,000 tonnes/month of linear-low density polyethylene (LLDPE) to Mexico, we understand. Previously, it had virtually no presence in the country.
The US, despite its ethane cost advantage, looks as if it is therefore heading for a pretty bad year, despite what one source tells is a great deal of publicly expressed confidence.
"US producers remain amazingly bullish - hence, the attempts to push-through a 5 cent/lb increase in PE contract prices since May, which again failed in September," added the source.
"People are now talking about a 2-3 cents/lb fall in October prices"
Two producers have announced 3 cents/lb cuts for October contracts, according to ICIS news.
."I don't think the US has woken up to the fact that the markets have fundamentally changed, and that in China in particular demand has weakened, and that weaker demand is a multi-year and not a short term problem," added the source.