MOSCOW (MRC) - The shortage of low density polyethylene (LDPE) continues to grow in the Russian market, while two producers are going for maintenance works soon. Prices for polyethylene this week exceeded the record level of April, according to ICIS-MRC Price Report.
Supply of LDPE has been tightening since the second half of June in the Russian market, and the deficit increases every day. Gazprom neftekhim Salavat has shut its PE capacities, and Ufaorgsintez and Angarsk ZP will also shut for turnarounds in July, which aggravate the supply of material even more. Prices for some PE grades exceeded Rb110,000/tonne by mid-July.
Russian LDPE consumers in the second time this year faced the shortage and the record high price level. The first of which occurred in April because of the shut down of the production at Kazanorgsintez. Thus, both cases resulted from scheduled maintenance works at the local plants.
However, the current case is more serious. Gazprom neftekhim Salavat shut down its LDPE production for a one-month maintenance from 24 June (the plant's annual capacity is 45,000 tonnes). Ufaorgsintez will shut its two lines of PE production (88,000 tonnes/year) on 13, July. Angar ZP will shut its 77,000 tonnes/year PE production for the turnaround from 20, July to 28, August. Besides, Kazanorgsintez because of the ethylene shortage has been working at the lower production rates. Annual PE capacity utilisation at the plan is 210,000/tonnes.
All of these factors (scheduled maintenances and lower production rates) led to a serious imbalance of supply and demand in the Russian LDPE market. This situation can last several months, in the end of August Tomskneftekhim is also going for the turnaround (annual capacity is 240,000/tonnes).
The sharp deficit has led to a new record level of LDPE prices in the mid-July. In most cases, converters had to buy feedstock above the level of Rb100,000/tonne FCA, including VAT, and, in some cases, the deals for PE for the production of shrinkable films reached Rb110,000/tonne FCA, including VAT.
Converters reacted differently to the situation. Some of them suspend their LDPE purchases, not willing to pay for the feedstock more than Rb100,000/tonne FCA, including VAT. Some converters had to accept such a high level of LDPE prices because of contracts for films production, companies are trying to agree a new level of prices for finished products.
MRC