PE Prices in South China Kept High amid Unreasonable Supply and Demand

SCI99 Edit at: 2017-8-25 16:22:18
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In recent years, The PE prices in South China were higher than that in other regions in China. Taking LLDPE as an example, in 2017, the average LLDPE prices in South China were RMB 133/mt higher than that in East China, and RMB 288/mt than that in North China. The large supply gap in this area led to the influx of sources from other areas, and the arbitrage window kept opening. 

From the demand side, China’s PE apparent consumption volume in 2016 was 24,160kt. Hereinto, the consumption volume in South China was 5,650kt, taking up 23.4% of the total. The downstream industries were mainly blow molding industry, injection industry and extrusion molding industry. The plastic processing industries were mainly concentrated in the Pearl River Delta.

From the supply side, there were 4 PE producers in South China, respectively Sinopec Guangzhou Company, Sinopec Maoming Company, Fujian Refining & Petrochemical and Sinopec & Shell Petrochemicals. The total capacity was 2,540kt/mt. 2,009kt/a of PE was consumed by the local buyers and the rest was supplied to outside. The degree of self-sufficiency in South China was about 37%, far lower than the national average level of 58%. Thus most sources of PE in South China were imported or from other areas. According to statistics, the import volume of PE in South China was accessed at 2,900kt, taking up 51% of the total consumption volume in South China.

The shortage of supply in South China made the PE prices higher than the national average. The price spread between different regions attracted the inflow of imported sources, coal chemical sources and sources from other regions. However, 700kt/a PE unit at CNOOC & Shell Petrochemicals and PE units of some coal-to-olefin enterprises will be put into use during the 13th five-year plan period, and with the continuous improvement of South China warehouse construction at coal-made polyethylene enterprises, the resource self-sufficiency rate will be greatly improved in south China. The price spread of PE between South China and other regions is expected to shrink.

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