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PE Margins Lowest On Record

Business, China, Company Strategy, Economics, Polyolefins
By John Richardson on 04-Mar-2012

By John Richardson

ANOTHER week has gone by with no evidence of significantly stronger polyethylene (PE) volumes in China.

Rising labour costs, because of mandated government increases in minimum wages, and the shortages of labour post-Lunar New Year, are still making it difficult for plastic converters to run at full capacity.

The recovery in pricing since the New Year has been almost entirely cost-driven, as the naphtha-based producers try to recover lost ground.

This was reflected in analysis by ICIS pricing, which, while assessing PE pricing at $10-40/tonne higher for the week ending 2 March, said that this was the result of oil and naphtha cost pressures. Producers had responded to the cost pressures by raising prices, prompting some restocking among end-users who were worried that oil and therefore naphtha would go even higher, added ICIS pricing.

Despite the $10-40/tonne increases in PE, margins remain under immense pressure. Northeast Asian integrated high-density PE (HDPE) margins fell to their lowest level since ICIS records began – minus $67/tonne – according to the Weekly Asian ICIS PE Margin Report. Integrated Northeast Asian low-density PE (LDPE) margins fell into negative territory for the first time since our records began.


This is all very worrying for those who have predicted that the market will enjoy a strong rebound in 2012, after last year’s disappointing demand growth. It is hard to see where the recovery is going to come from.