China polyolefin imports may weaken after February spike

12 April 2017 05:53 Source:ICIS News

Focus article by Amy Yu

SINGAPORE (ICIS)--China’s imports of polyolefins may not sustain the surge in volumes recorded in February, with the closure of arbitrage window due to price declines in the domestic market, industry sources said.

Low import costs had caused the spike in the country’s intake of deep-sea cargoes in February, but market conditions had changed by the middle of that month, they said.

March polyolefin import volumes may still register year-on-year growth but most probably not as strong February’s 60.4%.

For April and May, however, import volumes are expected to be lower compared with around 1.50m tonnes in February, as polyolefin prices in the domestic market have weakened due to ample supply and weak demand, industry sources said.

In end-March, spot prices of linear low density polyethylene (LLDPE) film averaged yuan (CNY) 9,400/tonne, down by around 6.7% from early February, while PP yarn fell by around 7% over the same period to CNY8,283/tonne, according to data compiled by the China editorial team at ICIS.

Of the total 1.50m tonnes of polyolefins imports in February, polyethylene (PE) volumes stood at 999,600 tonnes, registering an 80.2% year-on-year increase, while polypropylene (PP) volume posted a 52.1% growth to 501,700 tonnes, according to China Customs data.

These import volume included cargoes that were supposed to arrive in China in late January, but were delayed due to the week-long Lunar New Year holiday on 27 January to 2 February, market sources said.

Because of the open arbitrage window, China took in hefty volumes of US-origin polyolefins at 104,200 tonnes – more than a fourfold increase from 23,600 tonnes in the same period last year, official data showed.

China’s imports of US PP surged to 30,200 tonnes in February 2016 from 2,600 tonnes in the same period last year, while PE imports from the same origin more than tripled to 74,000 tonnes from 21,000 tonnes in February 2016.

But this may not be repeated in the coming months as the arbitrage window had closed in mid-February, market sources said.

China LLDPE film arbitrage window

China LLDPE arbitrage window 12 April
*the red line represents China's spot domestic LLDPE film prices; the green line tracks the imported duty-paid price of the polymer; and the gray area above the middle line represents an open arbitrage window

Source: China editorial team at ICIS

By Amy Yu