A series of shutdowns in India has given China’s PE exporters a window of opportunity, at a time when a surplus of Chinese import shipments are waiting for new homes, traders said. Chinese sellers have already increased their focus on PE re-exports to Southeast Asia in a bid to relieve their stock pressure.
Shutdowns at three major producers coincide in PE market
Shutdowns by GAIL (India) Limited and ONGC Petro additions Limited (OPaL) will take offline 760,000 tons/year of HDPE/LLDPE swing capacity and a dedicated 340,000 tons/year HDPE unit for about a month from 1 April. Another 220,000 tons/year of Brahmaputra Cracker and Polymer Limited’s (BPCL) LLDPE/HDPE swing unit will be offline for 11 days from March 29 in eastern India.
GAIL (India) also holds a 70% stake in BCPL and 49% in OPaL. There are also unconfirmed reports of production issues at another major PE producer in India.
“There may be commercial sense in the three shutdowns coinciding, as the suppliers may not want their pricing to be hit by any slide in the oil prices. But we think this is a perfect storm that the Chinese can exploit, at a time when there’s a surplus in China that can be exported out to destinations having stronger demand,” an Indian trader said.
China PE expected to find way to India
Another Indian trader said imports of HDPE and LLDPE should be priced in the mid-$1500s/ton to the low-$1600s/ton CIF east-coast India. “As we expect a tight situation for April, we are certain of Chinese shipments making their way to India. We think there’s at least an $80/ton discount on Chinese shipments, compared to Middle East ones. That’s a huge gap that can draw imports,” he said.
Meanwhile, Chinese traders have admitted that supply pressure in the country has led to re-export offers to destinations where better netbacks are available. “We are currently focusing more on export markets, where demand is much stronger,” said one of them.
Pressure from China re-exports already visible in SE Asia
The PE market in Southeast Asia has already seen re-exports from China with prices undercutting regular suppliers by $20-50/ton. In fact, a very low offer for a US-origin HDPE film for re-exports from China was noted in the previous week at $1330/ton CIF Vietnam, standing at least $60/ton below regular Middle Eastern suppliers.
“Supply is ample in the domestic market and this is likely leading to re-exports from China to opportune destinations,” said another Chinese trader.
He pointed to major producers’ inventory levels at around 790,000 tonnes on Wednesday. “Stock levels are still adequate. Demand is too weak in the domestic market. Hence, we think prices may stay at current levels and remain attractive to export markets,” he added.