China HDPE yarn at three-month low as coal-based supply grows

23 July 2018 08:26 Source:ICIS News

SINGAPORE (ICIS)--High density polyethylene (HDPE) yarn prices in China’s domestic spot market are currently at their three-month low, after steadily falling since late May due to growing supply of coal-based material.

On 20 July, spot prices of HDPE yarn in east China were assessed at yuan (CNY) 10,875/tonne ($1,606/tonne) EXWH (ex-warehouse), down by CNY925/tonne or 7.8% from 25 May, ICIS data showed.

The assessment took into account the prices of both coal-based and naphtha-based material.

Coal-based output accounts for about 45% of China’s overall HDPE yarn production.

HDPE yarn can be used in the production of nets, ropes, small and medium-sized containers and colored stripe cloth.

In the first half of 2018, domestic supply of HDPE yarn was estimated to have increased by about 5.5% year on year, as more coal-based plants started producing the grade this year.

“Although naphtha-based supply is limited as PetroChina Fushun Petrochemical didn’t produce HDPE yarn from April to June, more coal-based plants produced the grade for good profits,” one trader said.

Based on current prices, HDPE yarn grades were higher by yuan (CNY) 1,577/tonne compared with LLDPE this year, more than double the CNY722/tonne gap in 2017.

Consequently, more coal-based HDPE/LLDPE swing units have switched to producing HDPE instead of LLDPE.

Six coal-based plants in China with about 1.8m tonnes/year of HDPE yarn capacity have been producing the grade this year.

Coal-based material was available last week at CNY10,400/tonne EXW (ex-works), lower by CNY800/tonne compared with naphtha-based prices.

A number of downstream factories in eastern and southern China were being lured by the low prices of coal-based HDPE yarn.

“Some factories making nets and ropes mixed about 50-70% of coal-based HDPE yarn into naphtha-based grade to lower costs,” a source from a downstream producer said.

“The factories making colored stripe cloth for sunlight shading or covering can all use coal-based grade,” the source said.

But factories that produce drinking containers must only use naphtha-based HDPE yarn due to properties of the materials and food certification, market sources said.

Spot prices of coal-based HDPE yarn have dropped sharply with oversupply in the market, prompting some coal-based plants to switch to producing other HDPE grades.

Meanwhile, PetroChina Daqing Petrochemical’s naphtha-based 240,000 tonne/year HDPE unit is undergoing maintenance from late July to mid-September.

The resulting reduction in supply should help stem the downtrend in naphtha-based HDPE yarn prices, a trader said.

Photo: HDPE yarn can be used in the production of nets, ropes, small and medium-sized containers and colored stripe cloth. (Mint Images/REX/Shutterstock)

Focus article by Lucy Shuai

($1 = CNY6.77)

By Lucy Shuai