China PE import supply from Iran may tighten on plant turnarounds

SINGAPORE (ICIS)–China’s supply of imported polyethylene (PE) from Iran may tighten over the next three months due to scheduled maintenance at major Iranian facilities.

On 18 May, high density PE (HDPE) film import cargoes were offered at $1,350-1,420/tonne CFR China, with those from Iran mostly quoted at the $1,400-1,420/tonne CFR China range.

Chinese PE importers, meanwhile, are also wary of the US’ imposition of sanctions on Iran as this would mean increased difficulty in doing cargo payments.

Several Chinese distributors have had to use third parties to remit payments for Iranian cargoes via Dubai to go around the financial sanctions.

Market players expect the sanctions to be tighter this time around.

In the meantime, some Chinese buyers have been receiving requests from some Iranian suppliers to make payments in euros instead of US dollars in the future.

Payment problems may prompt some Chinese traders to reduce procurement of Iranian cargoes.

Last year, China’s PE imports from Iran increased to 1.97m tonnes – backed by expansion in Iranian PE capacity – but their share to the total has slipped to 16.7% from 18.9% in 2016, official data showed.

The import volume from Iran could have been bigger if not for the payment issues, which had prompted some Chinese distributors to give up purchasing Iranian cargoes last year.

Iran’s share to China’s total PE imports may continue to decline this year amid the payment issues, with Chinese banks restricting granting of letters of credits (LCs) on transactions involving Iranian cargoes.

Still, Iran has sufficient volumes that attract cash-rich Chinese distributors for hedging activities.

China’s overall PE imports in May to July are expected to remain high despite reduced supply from Iran. Given the market’s comparatively high prices, particularly for HDPE, China has been attracting supply from the US, Brazil and southeast Asia this week.

Huge shale-based PE production that recently started up in the US may find also their way into China in the third quarter.

Since concerns about a possible trade war “between China and US [have] not subsided, and the shipment of American cargoes might be delayed due to the unstable operation of new plants, we also hold [a] cautious attitude toward the purchase of American cargoes,” an east China-based distributor said.

The distributor has bought “a lot of American cargoes [for third-quarter arrival]… due to the possible absence of Iranian imports”.

Focus article by Angie Li

Picture: The South Pars gas field in Iran’s southern port of Asaluyeh, Iran (Source: KeystoneUSA-ZUMA/REX/Shutterstock)