Asian PP, PE traders eye arbitrage opportunities in USA

As reported earlier this week, more petrochemical plants in the USA are affected by the recent hurricane that caused heavy flood along the coastal area of Houston. These plants might need weeks or months to regain the normal production rate, leading to a massive concern over the state of supply in the coming months, when the traditional high demand season for packaging kick-start. 

Until today, PP sector faces the worst situation, with the number of capacity went offline due to the storm accounted for nearly 65% of total production output in the USA. This is followed by propylene at 53% and ethylene at 50%. With major producers are unable to fulfil commitment, some USA buyers started looking for materials outside of the country.

A Chinese trader reported to have received inquiries for homo-PP cargoes from an irregular USA buyer said, “Unfortunately, PP supply condition within China is also very tight. Prices are firming up too rapidly here, which means arbitrage window is still limited. However, we are keeping an eye out for any opportunity if the location gap is profitable enough for re-exporting.”

Another Vietnamese trader is reportedly collecting homo-PP and HDPE injection cargoes with aim to supply to the USA in anticipation of surging prices in this market after such severe outages. The source said, “Demand in Vietnam is very weak and it makes sense for us to seek opportunity in other markets. We have been re-exporting some LLDPE film cargoes to China over the past weeks, and at the moment, USA appears to be in need of material.”

It is still unclear on how severe is the impact the storm has on the petchem plants in Houston as producer could only able to determine the damage when they attempt to restart the plant, industry expert said. At the meantime, Asian traders are keeping a close eye to market movement, hoping to achieve annual target by leveraging the possible opportunity emerge in the final quarter of the year.