Domestic PE prices hit three to four year highs in China

17-Oct-13

Domestic PE prices have opened the post-holiday period on a rising trend in China, with players citing supply limitations stemming from the recent typhoon in eastern China along with strong LLDPE futures prices as the main reason for higher prices. The most recent hikes have pushed local prices for LLDPE and HDPE to their highest levels of the past four years while LDPE prices have hit a three-year high. According to data from ChemOrbis Price Index, local LLDPE prices have jumped US$89/ton since the start of September on an ex-warehouse China basis while HDPE prices have risen US$63/ton over the same period. Meanwhile, LDPE prices saw the largest jump of any PE product, gaining US$164/ton compared with the beginning of September. Tight supplies were cited as the primary reason for the spike in prices. A distributor based in Ningbo said that they received new offers from domestic producers with increases of CNY400/ton (US$65/ton) for LDPE, CNY150/ton (US$25/ton) for LLDPE and CNY100-200/ton (US$16-33/ton) for HDPE. “Trading activity is beginning to get back to normal in Ningbo, although parts of nearby Yuyao are still flooded and activity remains limited in that city,” the distributor said. A trader based in Cixi commented, “Some materials in the warehouses, especially those packed in paper bags, were soaked by the heavy rains and flooding and are now unable to meet quality requirements. We believe that the resulting tightness in supply will push prices higher over the short term.” Supply issues are also being reported from Iran, which has become a key PE supplier to China. According to data from Chinese Customs, Iran has been the largest exporter of HDPE to China during the first eight months of 2013, narrowly topping Saudi Arabia with total exports of 593,432 tons. Iran has also been the country’s top supplier of LDPE, exporting 240,688 tons during the first eight months of the year, well ahead of the 146,014 tons exported by South Korea, the country’s second largest LDPE supplier. “Iran is experiencing some power supply issues which are preventing most polymer plants within that country from operating above 50% of capacity,” a trader based in Singapore reported. A source from a Southeast Asian producer added, “We hear that power and gas supply problems are keeping operating rates low in Iran and we hear rumors on the market that this situation may remain in place for the next two to three months.”