China’s LDPE price spread with LLDPE rises as PE import supply falls

SINGAPORE (ICIS)–Price spread between low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) in China has risen to CNY1,900/tonnes, the highest on record since 5 January 2017, as a result of shortage of Iranian PE cargoes since early June.

On 17 August, domestic LDPE prices were assessed at yuan (CNY) 9,000/tonne EXWH (ex-warehouse) east China, while LLDPE prices stood at CNY7,100/tonne EXWH east China, ICIS data showed.

“Decreasing supply has supported the LDPE market, widening its gap to LLDPE prices and the wide spread may continue,” one Chinese trader said.

According to some traders, six Iranian ships could not arrive at China main ports, including Qingdao and Shanghai, from early June as a result of US sanctions.

The traders estimated more than 100,000 tonnes of PE to have been affected.

Iran accounted for around 22% of China’s 3.43m tonnes of LDPE imports in 2019, according to the ICIS Supply and Demand database.

The LDPE imports from Iran decreased by around 25% in June of 2020 from May.

The traders attributed the recent surge in Iranian LDPE prices to tight supply.

According to the traders, LDPE cargoes were offered at more than CNY9,000/tonne.

Some downstream factories are searching other LDPE products to substitute Iranian cargoes, which resulted in short supply in the market.

Meanwhile, the domestic supply was tight from planned or unplanned units shut down.

China’s domestic LDPE output fell by 6% from a year ago to around 1.56m tonnes in the first seven months of 2020, ICIS data showed.

On the other hand, the country’s LLDPE supply (domestic output and imports) increased by 11% from year-ago levels to 7.17m tonnes from January to June this year.

There were several factors for increased LLDPE supply: Zhejiang Petrochemical’s 450,000 tonne/year HDPE/LLDPE plant was commissioned in Q1 2020; PE imports from the US increased because of China’s exemptions of import tariffs on US-origin LLDPE and high density PE (HDPE) in the first quarter.

By contrast, there were no new LDPE units in the last two years.

Looking ahead, Bora-Basell PC’s 450,000 tonne/year HDPE/LLDPE plant and Yantai Wanhua’s 450,000 tonne/year LLDPE plant are expected to start up in Q3, which will add to LLDPE supply.

“If the Iranian cargoes cannot be discharged in the near future, the widening price spread between LLDPE and LDPE could persist,” the trader said.

Focus article by Lucy Shuai