Tighter PE supply from Iran to China expected

China’s supply of imported polyethylene (PE) from Iran may slacken over the next three months due to scheduled maintenance at major Iranian facilities.

Chinese PE importers are also wary of the US’s imposed sanctions on Iran as this would mean increased difficulty in undertaking cargo payments.

Last year, Iran exported 1.97 million tonnes of PE to China but the import volume could have been bigger if not for the payment issues, which had prompted some Chinese distributors to give up purchasing Iranian PE.

Several Chinese distributors have had to use third parties to remit payments for Iranian cargoes via Dubai to go around the financial sanctions.Market-players expect the sanctions to be tighter this time around.

In the meantime, some Chinese buyers have been receiving requests from some Iranian suppliers to make payments in euros instead of US dollars in the future.

Iranian PE imports to China may continue to decline this year amid the payment issues, with Chinese banks restricting granting of letters of credits (LCs) on transactions involving Iranian cargoes. Still, Iran has sufficient volumes that attract cash-rich Chinese distributors for hedging activities.

China’s overall PE imports from May to July are expected to remain high despite reduced supply from Iran. Given the market’s comparatively high prices, particularly for HDPE, China has started exporting PE from the US, Brazil and Southeast Asia.

The US is expected to figure largely in PE exports to China with the start-up of huge shale-based PE production.