US polyethylene traders faced increased risk from exports as prices have risen more than buyers’ forward demand and made back to back deals impossible, trading sources said. Offers for high density blow molding, for example, were 52-53 cents/lb FAS Houston ($1,146-$1,168/mt) but bids for deepsea blow molding in China were talked at $1,170/mt CFR.
LLDPE was offered at 54 cents/lb FAS Houston ($1,190/mt) but traders said bids were only at $1,200-$1,210/mt CFR China for late August or September arrival cargoes. Traders had been able to make back to back deals for US PE to China and
other destinations for most of the year but in June demand slowed for deepsea parcels as US prices headed higher. The lack of back to back demand has meant traders need to take long positions in the belief that local prices will be stable or go higher in China until September at which time they can sell the US material they buy in July or August.
Regional cargoes in Asia for China still kept a premium over US exports due to the shorter delivery time. Traders, however, were nervous about building stocks as they had fresh memories of getting stuck with high priced inventory at the end of 2008. Another problem traders faced was that if they did not accept producer offers, they risked not getting any product at all. At least two producers were heard to have asked traders for the volume they wanted in August because those makers only want to produce to meet demand. Instead of producers risking losses on an inventory build, this strategy makes traders take the risk.