Chinese players: Pipeline explosion in Iran might tighten PE market for longer

Chinese buyers have been facing a limited number of new PE offers from overseas sellers for couples of weeks due to heavy maintenance shutdown schedule at major international plants. Supply is expected to curtail further in the near to medium term following the ethylene pipeline explosion occurred in Iran last Sunday, that affected operation rate at several PE plants. 

On Sunday, 7 April 2019, the West Ethylene Gas Pipeline ruptured in the western Kermanshah Province, Iran, disrupting operating rates at several petrochemical plants.

Market sources reported that at least five PE plants, which received ethylene from the pipeline, were forced to either shut down or reduce run rate as a result of the incident. 

As a kneejerk effect, Chinese buyers immediately accepted the price hike from a major Thailand producer for HDPE film and deals have reached $1210/ton CFR China, LC AS term. Meanwhile, most other suppliers are leveraging on the issue to lift prices. 

There has been a wide conspiracy that HDPE film supply is set to drop significantly in the coming weeks. Although the mentioned Iranian plants might be able to restart by the end of April, the country has been struggling with heavy flood and landslide that destroyed many buildings. 

“Once these plant restarted, there could be a tendency to produce HDPE pipe more than other grades. Demand for building materials would pick up as the country attempt to repair the damages,” a Chinese trader said.

As at the time this report is published, import HDPE and LDPE film to China has hit the highest level since the beginning of the year. Import LLDPE film is trailing behind but might see some support from other grades.