China’s LDPE/LLDPE spread to narrow on weaker LDPE prices
Angie Li
10-May-2017
SINGAPORE (ICIS)–The price gap between low density polyethylene (LDPE) and linear low density PE (LLDPE) in the China market is expected to narrow in the second quarter of 2017 because of weakened LDPE prices, market sources said on Wednesday.
Market players hold bearish expectations on domestic LDPE prices mainly because of the addition of new capacities at home and abroad (see the table for details), the sources said.
Domestic LDPE was assessed yuan (CNY) 9,900-10,200/tonne ($1,433-1,478/tonne) on 8 May, a drop of 7.5% compared with prices on 1 April, according to China editorial team at ICIS.
Meanwhile, the prices of LLDPE will be supported as domestic supply is likely to decline due to unit turnarounds in May and June, an east China-based trader said.
Yangzi Petrochemical shut its 200,000 tonne/year HDPE/LLDPE swing plant on 26 April, and may not restart the plant before the overhaul at its crackers.
The company is planning to shut its crackers for overhaul between 21 May and 5 July.
Fushun Petrochemical plans to shut its 450,000 tonne/year swing plant in early June for 40-45 days of turnaround. Qilu Petrochemical also plans to shut its crackers from 15 May to late June for maintenance.
As such, some market players would sell LDPE futures cargoes and buy LLDPE futures to enjoy higher margins through the narrowed LDPE and LLDPE spread, the trader said.
The current spread is CNY1,133/tonne on 8 May, ICIS data showed.
Some market players have started selling LDPE volumes for delivery in August and September with a premium of CNY1,000/tonne to LLPDE futures prices.
However, others remained cautious in view of uncertainty with the operating status of new capacities and expectations of falling imported cargoes from Iran.
Iranian LDPE import cargoes may decline from April due to difficulties in obtaining a letter of credit (L/C) from banks.
Producer |
Location |
LDPE (‘000 tonnes) |
Time of operation |
Shenhua Group |
Xinjiang China |
270 |
Oct 2016 |
Shenhua Group |
Shaanxi, China |
300 |
Jan 2016 |
Zhongtian Hechuang Energy |
Inner Mongolia China |
120+250 |
Q2 2017 |
Jiangsu Sailboat Petrochemical |
Jiangsu China |
300 |
Q2 2017 |
Braskem Idesa |
Nachital, Mexico |
300 |
Q2 2016 |
Kordestan |
Iran |
300 |
Mar 2017 |
Sadara |
Saudi |
350 |
May 2017 |
Reliance |
India |
400 |
H2 2017 |
$1 = CNY6.91
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