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Cargo flow limited despite opening of South East Asia polyethylene arbitrage window

April 10/2012

(plastemart) -- The arbitrage opportunity to move polyethylene cargoes from China to Southeast Asia is open, but cargo flow is still limited.

Traders are mainly moving linear low density polyethylene (LLDPE) from Chinese bonded warehouses to Southeast Asia, in a practice called "re-exporting." The main factor behind this has largely been slow PE demand in China due to lower-than-usual orders for finished products. Concurrently, this is the conventionally low demand season between April and May for the PE market.

This has caused a big gap between prices of ex-warehouse cargoes and shipment cargoes.  China has been closed for a public holiday Monday to Wednesday, preventing any price movements.

PE in Southeast Asia has been on an uptrend due to tight local supply, particularly in Indonesia where domestic production has been low, especially of LLDPE, due to poor margins.  Market sources were unable to pinpoint exactly when the arbitrage window opened, but have seen movements over the last two weeks. Traders in China prefer to hold on to their lower cost cargo.
Author:Anna Larionova
Category:General News
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