Cargo flow limited despite opening of South East Asia polyethylene arbitrage

07-Apr-12
The arbitrage opportunity to move polyethylene cargoes from China to Southeast Asia is open, but cargo flow is still limited, as per market players in Platts. Traders are mainly moving linear low density polyethylene (LLDPE) from Chinese bonded warehouses to Southeast Asia, in a practice called "re-exporting." The main factor behind this has largely been slow PE demand in China due to lower-than-usual orders for finished products. Concurrently, this is the conventionally low demand season between April and May for the PE market. This has caused a big gap between prices of ex-warehouse cargoes and shipment cargoes. Bonded warehouse cargoes were heard to be offered at US$1350-1370/mt late last week. China has been closed for a public holiday Monday to Wednesday, preventing any price movements. Meanwhile, LLDPE in Southeast Asia was heard to be offered at US$1460-1480/mt CFR this week. PE in Southeast Asia has been on an uptrend due to tight local supply, particularly in Indonesia where domestic production has been low, especially of LLDPE, due to poor margins. Factoring in logistics costs at about US$25-30/mt, at Chinese bonded warehouses and shipping cost of US$20-40/mt from Chinese main ports to Southeast Asia, sellers are technically able to take advantage of the arbitrage opportunity. Market sources were unable to pinpoint exactly when the arbitrage window opened, but have seen movements over the last two weeks. Traders in China prefer to hold on to their lower cost cargo.
  More News  Post Your Comment
{{comment.Name}} made a post.
{{comment.DateTimeStampDisplay}}

{{comment.Comments}}

COMMENTS

0

There are no comments to display. Be the first one to comment!

*

Name Required.

*

Email Id Required.

Email Id Not Valid.

*

Mobile Required.

Email ID and Mobile Number are kept private and will not be shown publicly.
*

Message Required.

Click to Change image  Refresh Captcha