Three digit increases in PE prices as supply tightness intensifies globally

Tightness of PE supply has led to three digit price increases compared to February levels in many major markets, according to ChemOrbis. Availability constraints from the Middle East appear to be a prominent factor behind the persisting tightness, while cautious purchases amid the downtrend in the previous months is affecting availability in local markets. PE market in China was propped by limited avails amid firmer upstream costs as players returned to the markets in the first week after the New Year holidays. Dwindling supply was attributed to maintenance shutdowns in the region in addition to reduced availability from the Middle East. A trader offering Iranian cargoes reported that supply was quite tight for Iranian HDPE inside China’s bonded warehouses, but added that supply issues might ease in the days ahead considering that large volumes of Iranian cargoes are scheduled to arrive at the ports later this month. The tightness also made its effect felt in Southeast Asia where Middle Eastern producers announced their initial March PE prices with up to three digit hikes in line with firmer costs and restricted availability. A Thai producer also announced hikes of US$90/ton on new HDPE offers to the region last week. A producer source said that they expect their hike targets to receive support from supply limitations. A similar case was observed in the Egyptian PE market, with supply constraints being visible for Saudi Arabian origins. Local producer SIDPEC also issued EGP1300-1500/ton (US$170-196) increases for March. A source from the company said that tight supply played a role in their hikes in addition to firmer naphtha and ethylene costs. Most sellers had avoided building stocks due to the weak local currency and liquidity issues which led to reduced supplies being available in the local market. In Turkey, cancellations from Iran, the Nowruz holidays and limited allocations from Middle Eastern suppliers were among factors that triggered availability constraints in the PE market, according to ChemOrbis. The tightness appears to have intensified as of last week due to congestion at customs. Earlier in March, Turkey’s Ministry of Economy made an update on a regulation dated February 17, 2014 regarding the supervision of plastic raw material imports which would require certificate and approval from Turkey’s Ministry of Environment as a part of its environmental protection plan. This adjustment caused long queues at the borders. Even though the regulation was partly fixed by the middle of last week, players reported that problems at the customs were not completely solved. In addition, Iran was completely absent from the import market last week while new March PE prices were awaited from the Middle Eastern producers whose availability is reportedly not sufficient. Tightness across the European markets persists in March and it is seen lending support to sellers who are aiming for hikes beyond the gains of €100/ton in the monomer contracts as per ChemOrbis. Buyers continue to voice their concerns regarding short availability this week. According to players in the region, several European producers have already closed their March sales early in the month, as was the case in February, which has triggered expectations of further gains for the second half of the month. A distributor commented, “We have almost sold out our March allocation as we could procure only half of our allocation from a West European supplier. Our South European supplier also supplied us with only LDPE this month.”