Chinese players: Latest trade spat pinches PE market, but PP remains healthy

The Chinese government on 8 August 2018 announced the plan to implement a retaliate tariff of 25 per cent on 333 products import from the USA, of which a number petrochemical products were enlisted, including HDPE, LLDPE and PP.

Following the announcement, there has been a mild panic in the import PE market as Chinese traders, who purchased USA cargoes previously are looking to divert the shipment to other markets to avoid the duties, which will come into effect on 23 August 2018.

“We are having about 500 tons of off-grade LLDPE film and 800 tons of HDPE injection that just left USA port. We are looking for buyers in Southeast Asia and hope to amend the destination port soon. We are focusing on resolving the immediate problem before planning for the longer term,” a trader informed. 

A number of other international traders are performing similar activities, resulted in a heavy influx of USA material to Southeast Asia market, especially Vietnam. A buyer here reported having purchased 2000 tons of USA LLDPE film for both prime and off-grade at prices below the $1100/ton threshold while seeing off-grade metallocene PE widely available in the open market.

Other traders are requesting the principal suppliers in the USA to bear the 25 per cent costs differential due to the import duties would they are unable to change the destination port. 

In the meantime, trading activities for import homo-PP remain pretty smooth and healthy. Several Saudi Arabia producers claimed to have sold-out available cargoes to China at $1230-1250/ton CFR, LC 0-90 days term.

“We managed to sell off 500 tons of Vietnamese homo-PP at $1260-1270/ton CFR China, LC AS easily. As long as the domestic market remains above the CNY10,000 mark, demand for import cargoes would hold steady,” a regional trader commented.

The near-term market outlook offers little clarity on the trend for PE market as fear of intensified trade war continue to linger. However, the PP sector might enjoy a stable to slightly firmer trend thanks to the tightening supply condition.

At the time this report is published, import offers to China stand at 

$1090-1240/ton for LLDPE film 

$1300-1360/ton for HDPE film 

$1130-1185/ton for LDPE film 

$1220-1270/ton for homo-PP yarn and injection