Firmer ethylene costs provide a floor for LLDPE prices in Asia

23-Dec-11
Last week in Asia, import LLDPE film prices showed some signs of stabilizing after several consecutive weeks of declining prices, as per ChemOrbis. Sources attributed the stability in LLDPE film costs to firmer spot ethylene prices. Players commented that spot LLDPE film prices on a CFR China basis could fall below the prevailing spot prices for ethylene if spot LLDPE film prices were to continue to decline. Players added that import prices were also supported by late week rallies in crude oil and LLDPE futures prices. However, sellers complained that stronger upstream costs have not yet tempted many buyers to return to the market. “The demand outlook for the upcoming month is not very promising and the recent increases in upstream costs have not resulted in any noticeable up-tick in buying interest,” reported a source at a Chinese producer. LLDPE film prices on a CFR China basis moved closely in tandem with spot ethylene prices from the start of July to the end of November, maintaining a premium of between US$165-245/ton over spot ethylene prices on a CFR Far East Asia basis for five consecutive months, as per ChemOrbis. The premium between spot LLDPE film and spot ethylene prices has shrunk dramatically in December as spot ethylene prices have been pushed higher by supply issues in Asia while persistently poor demand has dragged spot LLDPE film prices downward. The premium fell below the US$100/ton threshold in the first full week of December and currently sits at just US$15/ton. The reduction in premium between LLDPE film and spot ethylene prices has led many players to predict that spot LLDPE film prices are likely to stabilize over the short term as non-integrated producers in Asia cannot afford to agree to any further reductions on their LLDPE prices.
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