Bag manufacturers in Asia reduce output on weak demand, high PE costs

16-Feb-11

Plastic bag manufacturer in Asia have reduced production rates amid weak seasonal demand and high polyethylene resin costs, as per Platts. The higher resin costs make it difficult for converters to pass on the cost to customers. Inflation in parts of Asia has also prompted downstream users to be more prudent when using plastic packaging. In addition, increasing interest rates in China have made it difficult for buyers who need to borrow from the banks there. Asian PE producers, however, point to high ethylene feedstock costs for the need to raise offers, especially for March shipments. Ethylene has been on an uptrend since November 9, 2010, when it was assessed at US$971/MT CFR Northeast Asia, rising to US$1306/MT CFR Northeast Asia last Friday. Comparatively, HDPE-film was assessed at US$1320/MT CFR Far East Asia Friday, up only US$50/MT over the same period, leading to a spread of just US$14/MT between HDPE-film and ethylene. HDPE-film offers from Asian producers are expected to surpass the US$1400/MT CFR China level and this was expected to result in strong resistance from end-users, who were indicating bids at around US$1300/MT. In China, domestic ex-works cargoes were offered at Yuan 10,700/MT, which is equivalent to around US$1302/MT on an import parity basis.