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Supply concerns, improving demand push LLDPE prices higher in Asia
(2010-08-06)
Asian PE markets have posted considerable increases over the past two weeks on the strength of stronger upstream costs and improved buying interest. Some of the fastest increases have been observed in the LLDPE market, where supply concerns along with the impending high season for agricultural film have encouraged strong buying interest from converters. PE prices in Asia have moved upwards over the past few weeks in response to stronger upstream markets. Crude oil prices have gained more than $5/barrel over the past week to surpass the $82/barrel threshold, while spot ethylene prices have posted week over week gains of $45-60/ton. Spot naphtha prices have also risen by $39/ton over the past week.
According to data from ChemOrbis Price Index, import LLDPE film prices in China gained $40-70/ton this week while HDPE and LDPE film prices recorded relatively smaller increases ranging from $20-50/ton.
In Southeast Asia, import LLDPE film prices shot up by $25-120/ton this week while import HDPE film prices rose at a slower rate of $20-70/ton. Two Southeast Asian producers report that they have already sold out their August allocations for LLDPE film to the Chinese market, with a Thai producer commenting that their August deals were concluded with cumulative increases of $90-100/ton over the course of the past two weeks. Traders in China and Vietnam have reportedly lifted their offers by as much as $100-105/ton this week, although no deals have been reported at their new offer levels yet. However, higher end offers may see more interest next week as the low end of the import offer range is expected to fade away as buyers have already purchased most of the cargoes available at the lower end of the range.
Converters have responded to rising PE prices in Asian markets by stepping up their purchases, although most buyers say that they are still avoiding making purchases in large amounts given their expectations that the current cost-driven PE price increases will not prove sustainable over the medium term due to the lack of sufficient support from the downstream side. Demand for LLDPE, however, is entering its high season in Asia as re-exporters begin preparations for their Christmas orders while converters in the agricultural film sector are also beginning to replenish their stocks ahead of the upcoming high season for their end products, which generally begins in mid-August in the Chinese market.
LLDPE buyers received a further incentive to secure some cargoes this week upon hearing news that ExxonMobil had to shut down its 600,000 tons/year LLDPE plant in Singapore following an extruder problem. The plant is expected to be off-line for the next two weeks. Inside China, Yangzi Petrochemical is conducting a month-long shutdown at its 200,000 tons/year LLDPE plant in China.
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