MOSCOW (MRC) – In early September the deficit in the Russian HDPE market increased on upcoming outages for maintenance of the major makers and a record price-level, report MRC analysts.
The lack of supply began to be already felt in early August in the Russian HDPE market. HDPE prices kept rising every week on the back of tightened supply. The record increase in prices was registered in early September on the back of the growing deficit and upcoming outages for maintenance at Kazanorgsintez (for 30 days from September 10) and at Nizhnekamskneftekhim (for 10 days from September 26). At the beginning of the week bids at electronic trades for Kazanorgsintez and Niznekamskneftekhim HDPE came close to the level of Rb100,000/tonne, including VAT, FCA, and for some grades they even exceeded this level.
Most acutely the deficit is felt in the market of film, blow moulding and pipe HDPE. Some converters claim that with such a level of PE prices it is more profitable for them to stop their production till the situation in the market is stabilized. Some converters have to accept the current price-level since they have contractual obligations before customers of the finished goods.
August and September are traditionally hot months for Russian HDPE market, but this year has become a surprise to all market participants. In the first half of the year the absence of Stavrolen PE was practically not felt in the market, however, by July the lack of the material from Budenovsk had already started having an impact on the market balance. Scheduled outages at Gazpromneftekhim Salavat and Karpatneftekhim (Ukraine) aggravated the situation in the market.
Gazprom neftekhim Salavat stopped its HDPE production for a monthly turnaround in late July. However, so far the plant has not resumed its production. Since September 1 Karpatneftekhim has shut its HDPE plant for a scheduled two-months’ turnaround. The plant shipped to Russia on average about 7,000 tonnes on monthly basis.
Some Russian traders tried to find an alternative to Russian HDPE in the foreign markets. Still in July traders actively contracted PE in Europe, Asia, the USA and the Middle East. Purchasing volume of European HDPE was insignificant though due to tightened supply. Asian makers have also sold out all their August and September volumes in the regional market. Russian traders only managed to buy small volumes. Meantime, according to importers, most volumes of the contracted PE will start arriving in the Russian market only starting from the next week due to issues in logistics while the first shipments were planned for a second half of August.
Some market participants hope that an early launch of HDPE production at Gazprom neftekhim Salavat and Stavrolen will halt the rise in prices. The highest expectations are assigned to the early resumption of production at Stavrolen. The production capacity of the plant makes 300,000 tpa and there is a possibility to produce several main grades simultaneously. The first stage of the resumption of production at Budenovsk plant, which is a launch of ethylene production, is scheduled for September 15.
MRC