Gap between HDPE film and ethylene narrows in China
According to data from ChemOrbis Price Wizard, spot ethylene prices on a CFR Far East Asia basis have increased by around $240/ton since the first week of September after plunging by $640/ton in a period of around four months. Higher spot ethylene prices are attributed to limited spot availability in Asian markets. China’s HDPE film market, on the other hand, has been on a softer trend for the last six months due to persistently lackluster demand amidst ample supplies. Data from ChemOrbis Price Index shows that import HDPE film prices on a weekly average basis have lost around $270/ton since the start of May.
The data shows that HDPE film prices traded at a premium of around $245-400/ton over spot ethylene prices in the August-September period. In early September, the premium reached $400/ton, the healthiest level since May 2009. It has started to narrow since then and HDPE film prices have lost a premium of around $275/ton over ethylene. This week, HDPE film’s premium over ethylene decreased around $20/ton on a weekly basis, falling to $125-130/ton. This suggests the lowest level since the beginning of July, although margins have managed to stay positive in contrast to the April-June period when HDPE film was sometimes traded at a discount to ethylene. As a rule of thumb, PE producers need at least $150/ton on top of ethylene costs to break-even. Current prices suggest that HDPE film margins are negative for non-integrated producers which exerts downward pressure on the ethylene market or will lead to a reduction in HDPE film output.
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