MOSCOW (Market Report) -- Contrary to the past years' experience, there was no major deficit in the Russian low density polyethylene (LDPE) market this April. Conversely, a producer announced a significant price reduction in early May, according to ICIS-MRC Price report.
In the previous years, a seasonal increase in demand for film products and a scheduled long maintenance at Kazanorgsintez, Russia's second largest producer, which is traditionally held in mid-April-early May were the main reasons for the spring growth in LDPE prices in the Russian market. In 2016, a shortage of LDPE in the market was aggravated by the forced outage at Angarsk Polymer Plant due to a failure at its ethylene unit. This year has become atypical over the past few years, and as a result, there was no noticeable price increase in April, and in early May, on the contrary, prices went down.
Some market participants said there was no seasonal surge in demand for film products partially because of bad weather conditions, partly due to higher imports of finished goods (a serious strengthening of the rouble against the dollar made imports more affordable for consumers). There has been also a decrease in demand in some sectors of the economy, particularly, in the construction sector, since early 2017.
Some converters, conversely, built up additional inventories of polyethylene (PE) in March (before the introduction of restrictions on freight road transportation and the scheduled shutdown at Kazanorgsintez), thereby minimizing their risks in April.
Partially, weak demand for LDPE during the spring period was caused by lower linear low density polyethylene (LLDPE) prices. The difference in LDPE prices and prices of some LLDPE grades reached Rb10,000/tonne and higher, and, as a consequence, converters increased the share of LLDPE in their procurement portfolio.
A major increase in LDPE prices never happened in the Russian market in April. Moreover, prices were virtually relatively steady during the whole month, only prices of Kazanorgsintez's LDPE grew because of tight supply. And in the second half of April, a slight reduction in prices of 108 grade LDPE began in the market, and by the end of the month, traders' offer prices for this PE grade had reached Rb94,500-95,500/tonne FCA, including VAT.
And already in early May, Tomskneftekhim announced a reduction of Rb7,000/tonne from April in its LDPE prices. Other producers have not agreed upon their prices for this month yet.