Polyethylene prices almost at par with ethylene in China

16-Apr-15

Players in China report that import PE prices are currently trading almost at par with ethylene in the spot market, according to ChemOrbis. Tight supply stemming from cracker turnarounds continues to push up spot ethylene prices while players report that PE sellers are facing resistance to their efforts to bring polymer prices into line with the prevailing monomer costs. According to data from ChemOrbis Price Index, import HDPE film prices on a CFR China basis are currently carrying a premium of only around US$10-15/ton relative to spot prices for ethylene on a CFR Northeast Asia basis. HDPE’s premium over ethylene has been steadily declining since late January, when the premium stood at almost US$250/ton. HDPE and ethylene prices had last traded this close to par back in October of 2014. There are reports from traders that some integrated producers have recently shifted to selling ethylene rather producing PE given the more attractive margins available on ethylene production. “Sellers are facing difficulties concluding deals for import PE cargoes in China as demand growth has been disappointing while competitive prices for domestic material are also limiting sellers’ scope to raise their import offers,” a trader based in Xiamen stated. Another trader reported that they managed to conclude a deal for Southeast Asian LLDPE film after agreeing to a discount. “PE prices should remain firm based on stronger spot ethylene costs. However, demand is not all that encouraging and we plan to wait to see new May announcements from overseas majors before making our next move,” the trader commented. A third trader added, “We find the prices we are receiving in the import market to be too high to accept, especially for LDPE. We believe that the current price levels are mostly speculative and that they will not prove lasting over the medium term.”