China PE, PP may firm as spot supply tightens amid heavy snowfall

Source: ICIS News


SINGAPORE (ICIS)--Polyethylene (PE) and polypropylene (PP) prices in China may increase further as available spot supply thins due to transportation problems posed by heavy snowfall in most parts of the country.

At the start of the week, domestic prices of linear low density PE (LLDPE) in east China were at Chinese yuan (CNY) 9,900/tonne ($1,516/tonne) ex-tank, up by CNY200/tonne compared with levels on 29 December 2017.

Prices of PP yarn in east China also increased by CNY200/tonne over the same period to CNY9,400/tonne ex-tank.

Central and eastern China have been inundated by heavy snowfall since 3 January, hampering transportation of polyolefins.

Highways in these regions have had to close and coal chemical producers in northwest China have suspended their deliveries from last week. The cargoes in transit are also delayed.

Northwest China has seven coal chemical producers, with a total PP and PE capacity of 6.47m tonnes/year, accounting for around 17% of the national total polyolefin capacity.

Truck deliveries have been halted, while the railway transportation has been largely stable, despite temporary suspension.

Most of their products are delivered to north and east China. The cargoes to north China are usually delivered by truck and usually arrive at the destination in three days, while deliveries to east China take a week by railway or around three days by truck.

A number of highways were closed temporarily in the second half of last week in response to the heavy snow, which affected the truck delivery in central and east China, a trader said.

The trader’s coal chemical products from Shaanxi last week were still in transit and were unlikely to arrive in the short term. Consequently, some worried buyers began purchasing PE, PP cargoes, nudging up prices.

Truck deliveries are expected to gradually resume from the second half of the week as the rains and snow have abated, market players said.

Chinese polyolefins prices have been increasing since the start of the year as the ban on imports of recycled plastic garbage takes effect, and were also tracking gains in the upstream crude markets.

China has published the first two of the expected 11 batches of companies to be given quotas for waste plastics imports, and has approved a much smaller import volume of 2,595 tonnes compared with 2.60m tonnes in the previous year. As a result, demand for virgin materials is expected to improve.

Meanwhile, gains in the upstream crude futures markets were also exerting an upward pressure on polyolefins prices.

At midday, Brent crude was up 37 cents at $69.19/bbl, while US crude increased 50 cents to $63.46/bbl, buoyed up by a tighter market following OPEC-led production cuts.

NYMEX WTI prices are at their highest level since December 2014, while ICE Brent was at its highest since May 2015.

Focus article by Lucy Shuai

Additional reporting by James Dennis

($1 = CNY6.53)

Picture: Vehicles covered in snow in Huainan city, Anhui province in east China. (Source: ImagineChina/REX/Shutterstock)