China PE imports to stay strong amid domestic plant turnarounds

SINGAPORE (ICIS)–China’s polyethylene (PE) imports are expected to remain strong for the rest of the year, after posting record volumes in January to April 2018, amid scheduled turnarounds at domestic facilities.

Buyers in China have been accumulating imported PE cargoes as these were priced lower compared futures prices since the start of the year.

More cargoes will be available to China as new capacities in the US are expected to boost production.

For the month of May, the country’s PE imports are projected to reach 1.2m tonnes, higher than the monthly average in the first four months of 2018.

In January to April 2018, its PE imports volumes totaled 4.47m tonnes, up by 12% from the previous corresponding period, according to industry sources.

The import volumes were making up for the production losses in the domestic market due to scheduled turnarounds.

On 1 June, low density PE (LDPE) imports were assessed at $1,155-1,180/tonne; linear low density PE (LLDPE) stood at $1,150-1,170/tonne; while high density PE (HDPE) film products were at $1,340-1,400/tonne, according to ICIS data.

The prices have increased 1.5-6.2% from end-March, but the gains came in lower than market players’ expectations considering the heavy production loss due to turnarounds from April.

An estimated 500,000 tonnes are expected to be shaved in the second quarter due to scheduled maintenance at domestic facilities, according ICIS data.

“We thought the hefty plant turnarounds in the second quarter should lead to a surge in PE prices, but the LDPE and LLDPE prices were less than satisfactory although HDPE prices [were] high,” said an east China-based trader, referring to both the import and domestic PE prices.

Strong imports amid hedging activities bloated the total supply in China in January to April to 9.98m tonnes, up by 8% from the previous corresponding period, with supply of LDPE and LLDPE up by 14% and 8%, respectively, market sources said.

Imports of HDPE inched up by 2% over the same period given the grade’s comparatively higher prices compared with LLDPE and LDPE.

Increased availability due to recent capacity expansions and start-ups in Asia the Middle East also fuels China’s appetite for import cargoes.

In the first quarter of 2018, additional cargoes from Saudi Arabia were mostly from Sadara Chemical, which started up its 750,000 tonne/year swing plant and 350,000 tonne/year LDPE plant in Al Jubail during late 2016 and early 2017, respectively.

Cargoes of Iran origin augmented the total volume from the UAE, as market players try to go around the financial sanctions on Tehran. Kordestan Petrochemical’s 300,000 tonne/year LDPE plant in Iran came on stream in March 2017.

UAE’s Borouge has also ramped up pipe and HDPE film exports to China during the period, according to a supplier in the Middle East.

Meanwhile, PE imports from Singapore surged 38% year on year, while those from India more than doubled to 127,000 tonnes, according to China Customs data.

The ban on waste plastics implemented in China in the year also bolstered imports of virgin PE. Some waste plastics processed overseas and then re-entered the market as virgin products, but these volumes were limited.

Last year, China has imported 1.94m tonnes of PE waste plastics, while volumes in 2018 will be negligible with the implemention of the ban.

China’s PE production this year is expected to increase by around 7% to about 17m tonnes in 2018, with imports projected to grow by 10.2% to around 13m tonnes, according to a source from state-owned petrochemical giant PetroChina.

Domestic demand for PE, on the other hand, is forecast to grow by 8% this year, mainly from the packaging and pipe markets.

China’s ongoing campaign to switch to using gas for power generation instead of coal is expected to continue boosting demand for PE gas pipes this year.

The packaging industry will also drive up PE consumption, underpinned by growth in electronic commerce. China’s express delivery volumes reached 13.7bn packages during January-April 2018, based on data from the recent China Express Industry Development Conference in May.

Focus article by Angie Li

Picture: Qingdao container port in China. (Photographer: Yu Fangping/Pacific Press via ZUMA Wire/REX/Shutterstock)