Trade flow changes adopted by China amid waning polyethylene demand

28-Apr-16

Sending excess polyethylene supply to new demand centers, dealing with the emergence of Russian-origin cargoes, and redirecting parcels to Vietnam are the survival strategies adopted by China in a bearish polyethylene market, as per sources at the Chinaplas 2016 conference reported in Platts. China was becoming increasingly self-sufficient and the excess supply was likely to be sent to regions of growing demand like Middle East and West Africa. China's overall PE deficit was expected to decrease from 7 mln mt in 2015 to 6 mln mt in 2016 once the additional coal-to-polyolefin capacity comes online. Several traders said West Africa was their target market, with expectations of a profit of "a few hundred dollars per ton" due to the high risk and difficulty in supplying the region. Distributors also said that they expected good margins in the Middle East by breaking bulk and selling small lots to converters. February saw the first HDPE and LLDPE imports from Russia in China -- 144 mt and 50 mt respectively, according to customs data. China had been already importing Russian LDPE -- 11,291 mt year to date, customs data showed. The weaker Russian ruble against the dollar earlier in the year made exports cheaper and this coupled with lower freight rates due to a fall in bunker fuel prices led to more cargoes arriving in China, traders said. Most traders said they expected the dollar to strengthen in 2016, which means that Russian exports to China are likely to continue. China also exported PE to Vietnam in March, traders said, adding that this was a new trade flow route as China is typically a net importer of PE. Re-exports from Chinese bonded warehouses were also expected to continue to Vietnam due to proximity, traders said.