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China-SE Asia polyethylene arbitrage open, but cargo flow limited: sources

April 05/2012
(nctww) -- The arbitrage opportunity to move polyethylene cargoes from China to Southeast Asia is open, market participants say, but cargo flow is still limited.

Linear low density polyethylene has been the main candidate for traders to move from Chinese bonded warehouses to Southeast Asia. The industry calls this practice "re-exporting."

This was largely because demand for PE is slow in China due to lower-than-usual orders for finished products, market sources said. At the same time, the PE market typically experiences a low demand season between April and May. This has caused a big gap between prices of ex-warehouse cargoes and shipment cargoes.

"We are re-exporting more cargoes from our Chinese warehouses to Southeast Asia," a Vietnam-based trader said.
 Market sources were unable to pinpoint exactly when the arbitrage window opened, but have seen movements over the last two weeks.

Other market participants said the such re-export trading is still limited.
"The arbitrage is wide open," a Singapore-based trader said. "But traders in China want to hold on to their lower cost cargo."
Author:Anna Larionova
Category:General News
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