PP, PE prices

GUANGZHOU (ICIS)--China’s polyethylene (PE) import demand may weaken further in the coming months because of high import prices that will deter buyers, industry sources said on Tuesday.

“The domestic retail PE prices have fallen quite a lot in the past weeks, but import prices have not fallen by as much. Hence, many processors prefer to buy from the retail market, rather than import cargoes,” a source with a Middle Eastern PE producer said.

The benchmark linear low density PE (LLDPE) was on average selling at yuan (CNY) 10,800/tonne ($1,659/tonne) EXWH (ex-warehouse) on 13 May, CNY350/tonne or 3.1% lower from mid-April, according to data from Chemease, an ICIS service in China.

The import cost of LLDPE was at least $35/tonne (€25/tonne) higher than current retail prices, local traders said.

The average retail price of injection grade polypropylene (PP) rose to CNY12,675/tonne EXWH on 13 May, up by CNY225/tonne or 1.8% from mid-April, but still lagged behind import costs, local traders said.

The benchmark injection grade PP is being offered from Asia at around $1,680/tonne CFR (cost & freight) China for June shipment, around $133/tonne higher than current retail prices.

China imported less PE and PP in March this year as a result of the high import costs, local traders said.

China imported around 230,000 tonnes of LLDPE and about 330,000 tonnes of homopolymer PP in March, which were 14% and 9% lower compared with the same month last year, according to China’s customs data.

China’s domestic retail polyolefins market has been weak since early this year mainly because of the government’s efforts to curb inflation by tightening credit lines, local traders said.

Naphtha-based PE and PP producers in northeast and southeast Asia said they could not reduce their price offers to China, despite the weak demand, because they were grappling with high naphtha and feedstock costs.

Some northeast Asian PE producers had said they would consider cutting production in May or June if regional PE prices do not catch up with rising spot ethylene prices.

Thailand’s PTT Chemical said it was considering cutting production in May or June because of low margins.

Taiwan’s Formosa Plastics Corp cut its PP production at its facilities at Mailiao by 25% in May because of squeezed margins.

More Asian producers may be forced to cut production if the June import prices of PE and PP fail to catch up with the propylene and ethylene feedstock prices, a northeast Asian producer said.

Asian producers typically need spot polyolefins to be priced at least $100/tonne above olefins to continue making resins, he said.

Spot ethylene and propylene were assessed at $1,355/tonne and $1,595/tonne on 16 May on a CFR northeast Asia basis, according to ICIS.

Traders’ offers for the benchmark LLDPE and yarn grade PP were at $1,350-1,380/tonne CFR China and $1,630-1,650/tonne CFR China, respectively, on 16 May, according to local traders.

Price discussions for June shipments of PE and PP are expected to be revved up during the four-day Chinaplas exhibition in Guangzhou, China, which begins on 17 May.

($1 = CNY6.51, $1 = €0.70)