Wide gap between local and imported PE prices in China

Falling crude oil prices have lead to demand slowdown in China making the Chinese market prone to price decreases this week. As per Chemorbis, buyers’ hesitation led to a reduction in sellers’ offers, which in turn triggered hesitation on part of buyers as they preferred to defer purchases while prices were coming down. Some converters even reported that their own customers of plastic films and bags are delaying purchases since they see the changing sentiment. In the local market, lower crude oil, falling LLDPE futures prices combined with the approaching slow season and new capacities which had already been accounted for in the outlook for next month caused domestic producers, CNPC and Sinopec to reduce prices. Distributors followed with their own price decreases this week. Many said they have some stocks and with slow sales, those stocks could start building. Preliminary import data indicate that April imports of PE rose again, according to players in the country. On the production side, two new petrochemical complexes are starting up in May inside China. Sinopec Zhenhai’s 1 mln tpa cracker supports 450,000 tpa of HDPE/LLDPE swing capacity. The complex started up in April but was forced to shut following a cracker outage and is set to restart at the end of May. Sinopec Tianjin Co. has opened its 1 mln tpa cracker complex to commercial production with 600,000 tpa PE capacity with 300,000 tpa each of HDPE and LLDPE. Following the price decreases in the domestic market, a wide gap has opened up with import prices despite the fact that imports also saw declines this week. The local LDPE market including domestic and locally held foreign origins is trading US$70-103/ton below imports after adding applicable customs duties and estimated clearing and handling charges to the import prices. In the case of LLDPE, the landed cost of imports would come US$60-74/ton above local prices. For HDPE, local prices are trading US$65-88/ton lower than the landed cost of imports. This disparity has led sellers in the import market to comment that they do not expect to see good sales to local players, leaving only re-export converters eligible to purchase imports for now.
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