PE prices gain premium on tightness in China

04-May-15

Players in China continue to report tight availability for PE products, particularly for LDPE, this week amid rising ethylene costs, as per ChemOrbis. Demand is mainly directed towards local materials as they still form a competitive edge against rising import prices. Among the turnaround driven supply constraints in the region, China’s BASF-YPC started maintenance that is expected to last almost 2 months at its 400,000 tpa LDPE/EVA swing plant in early April. Saudi Kayan has been keeping its 300,000 tpa LDPE plant offline since mid-March for maintenance. South Korean LG Chem will shut its 300,000 tpa LDPE plant located in Yeosu in May. The maintenance is expected to last 3 weeks. PetroChina shut its 600,000 tpa HDPE/LLDPE plant on April 10 in Dushanzi, China for 50 days of maintenance. Samsung Total’s HDPE/LLDPE units in Daesan with a capacity of 300,000 tpa were down in the second half of April for a scheduled turnaround that will last for 1.5 months. As for the May-June period, PetroChina will implement turnarounds at its 300,000 tpa HDPE and 220,000 tpa LLDPE plants in Jilin. According to ChemOrbis Price Index, the gap between import LDPE prices and other PE products expanded in the last few months given larger price gains for LDPE. A Southeast Asian producer who offers to China already sold out their allocation for May. “We have had less LDPE film supply recently since we are focusing more on LDPE coating grade,” a producer source noted. "Tight supply is keeping PE prices firm, especially for LDPE. However, we believe that sellers may need to step back on their offers over the near term in order to overcome resistance from buyers," a trader stated. A Shanghai based trader concurred saying, “There are still speculations about a supply shortage, especially for LDPE. However, the firm trend may need to see some relief in order to stimulate more buying interest considering stiff resistance from buyers towards upper end offers.” There is market talk about renewed PE hikes of around US$40-70/ton for May mainly due to limited cargoes and higher ethylene market as per ChemOrbis pricing service. Plus, players expect to see a pick-up in demand from the agriculture industry, according to a Hong Kong based trader. “Nevertheless, the majority of buyers keep their purchases in check as they believe that the market may see an adjustment in prices by mid-May and June,” he added.