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PE prices in China, Turkey under visible pressure from Iran

  • 25/05/2017 (04:09)
The gap between Iranian PE offers and other mainstream origins appears to have widened considerably in Turkey’s and China’s import markets recently. This is because long supplies particularly for HDPE grades pushed traders to offer Iranian cargoes aggressively.

In China, the prices of Iranian cargoes reported this week in the import market stand $60/ton below the low end of the prevailing LDPE range for other origins while this gap reaches $100/ton for LLDPE and HDPE film.

Chinese buyers prefer to source from the local market despite the recent increases as the local market is still below the import market. Demand for Iranian material was particularly weak as Chinese banks have been imposing restrictions on opening letters of credit for transactions with Iranian parties recently. Amidst growing sales pressure, traders in China have started to give more competitive offers.

A source from an Iranian producer clarified the problem, saying, “The Chinese government has applied a new regulation with the aim of controlling the flow of foreign currency into China, which required extra documentation for the overseas trading houses of Iranian petrochemical companies particularly in Dubai. Accordingly, transactions at the banks for Iranian cargoes have become problematic recently as banks did not want to involve in deals with companies which do not have the supporting documents. This problem has been mostly sorted out lately but it has created huge backlogs in Chinese ports.” This explains the recent aggressive sales made on cash terms, he commented.

According to the source, this backlog problem has come on top of the already high stock levels in China and exacerbated the sales pressure on the part of traders. High stocks in the country have not diminished despite widespread re-exports particularly to Southeast Asia. The source thinks that this fact will continue to put pressure on the market throughout June.

In Turkey, the same stock pressure has been in place more specifically for HDPE grades. Some argued that Iranian sellers directed their material to Turkey as a result of the problems in China. It is evident in the gap between Iranian HDPE offers for film and b/m grades and Middle Eastern origins offered in the import market as it has recently reached $110/ton.

A distributor in Turkey commented, “Given oversupply and upcoming capacities, HDPE prices for b/m, injection and film grades will remain under pressure in the long run.”
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