Softer local PE prices in China putting pressure on imports

13-May-11
Inside China, locally held PE prices moved lower this week as distributors reduced prices in hopes of attracting greater buying interest, as per Chemorbis. AS domestic PE is currently trading at a discount when compared with prevailing import prices, sellers offering import cargoes are likely to face some downward pressure over the coming week. Demand remains sluggish inside China, with most converters reported to be operating at reduced rates at 40-60% of capacity. In addition to the fact that it is currently the low season for agricultural film applications, demand has also been hampered by the recent fluctuations seen in crude oil and naphtha prices. Crude oil futures on the Nymex plunged nearly US$10/barrel on May 5 to fall below the US$100/barrel threshold for the first time since March 16. Crude oil prices later rebounded to rise as high as US$103.88/barrel on May 10 before dropping back down to US$98.21/barrel on May 11. These rapid and significant movements in crude oil prices have left many players unwilling to commit to a firm position in the market. Chinese traders are also holding sufficient stock levels for both LDPE and LLDPE film, with several Chinese traders looking to re-export LLDPE film cargoes to other global markets such as Southeast Asia while an offer for Chinese LDPE film appeared in the Vietnamese market this week. HDPE film demand is also said to be limited, although HDPE stock levels are comparatively tighter than LLDPE or LDPE stock in China. Inside China, locally-held LDPE and LLDPE film prices lost CNY100-200/ton (US$15-31/ton) this week while locally-held HDPE film prices were stable to CNY50/ton (US$8/ton) softer week over week. Most of these decreases came at the lower end of the overall range as producers were mostly unwilling to reduce their prices this week. Domestic producers are currently facing some downward pressure from the distribution market as offers from distributors are generally cheaper than producers’ prices, with reports coming in that the gap between producer prices and distribution market prices has reached levels as high as CNY500-600/ton (US$77-92/ton) in the LLDPE film market. Lower local market prices are also beginning to put some pressure on import PE prices. Import PE prices witnessed no major changes over the past week, with LDPE film prices rising US$15/ton on the high end, HDPE film prices firming up US$10/ton on the low end and LLDPE film prices shedding US$10/ton on the low end. Import prices are currently carrying a premium of US$75-80/ton for LDPE film, US$40-110/ton for LLDPE film and US$20-60/ton for HDPE film when compared with the prevailing price ranges for domestic materials after taking customs duties and an estimated US$30/ton for clearing and handling charges into account.
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