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PE producers face lack of ethylene supplies in Southeast Asia, Iran

  • 18/09/2017 (09:26)
Players operating in Asian PE markets report that overall supplies from Iran and Southeast Asia have reduced over the past couple of weeks as several producers are limiting their allocations for new shipments by pointing to their lack of ethylene availability.

Spot ethylene prices on FOB South Korea basis have been hovering around their highest levels since late February for the past three weeks. The cracker maintenance season across Asia and the steady demand from styrene makers have helped ethylene prices retain their strength so far. Data from ChemOrbis Price Index reveal that the weekly average of China’s import LLDPE and HDPE film prices have traded below the spot ethylene market for the past five weeks.

Given the significantly high levels of spot ethylene prices in Asia, some integrated PE producers reportedly prefer to sell their ethylene stocks instead of producing PE in the midst of the ethylene tightness while non-integrated ones mostly reduce their run rates as it is not profitable to produce PE under the current circumstances.

An Indonesian trader reported that he received offers from a Thai producer for only a limited amount of PE, saying, “The producer has reduced run rates at its PE plant in the face of a lack of ethylene supplies. They are only able to meet their regular customers’ needs for the moment. Styrene producers in Asia have absorbed the majority of the regional ethylene supplies over the past weeks.”

A few traders in Thailand also reported that a different Thai PE producer’s PE allocation is tight as the producer is facing an ethylene shortage.

According to a trader based in Singapore, two PE producers in Malaysia and Indonesia are also having limited availabilities for PE due to their reduced run rates amidst insufficient ethylene supply. “HDPE supplies are particularly limited while we also expect LLDPE and LDPE to tighten soon. PE producers are limiting their operations owing to high ethylene prices,” he commented.

A Malaysian producer revised its September PE offers up by around $48/ton after announcing its initial prices with larger hikes of around $58-70/ton. A producer source attributed their hike decision to their tight supplies, noting, “Spot ethylene prices are quite high while our ethylene production at our own cracker is not enough to cover our whole PE operations. Hence, we cut run rates at our PE plant instead of purchasing ethylene from the spot market.”

In the meantime, PE players in China report that Iranian PE suppliers are also limiting their allocations to the country by pointing to their supply issues for ethylene. According to some traders, there have also been some delays in their August deliveries from the country.

A trader operating in Shanghai commented, “Overall inventory levels are low on the traders’ side in line with the reduced number of import offers. Supplies from Iran are likely to tighten in the near term as we hardly hear PE offers from Iran nowadays. HDPE film supplies are particularly tight.”

Large traders in Turkey who regularly work with Iran also affirm the lack of ethylene on the side of Iranian producers. They argue that this factor is causing a reduced number of offers from Iran to Turkey, although this is yet to be confirmed directly with Iranian producers at the time of press.
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