The chasm between US and Asia polyolefins prices remains wide, close to a 5-year high for polyethylene and setting new highs for polypropylene. The polyethylene arbitrage is not large enough to encourage US imports – first Exhibit below – largely because of the very high container rates from China.
Source: Bloomberg, C-MACC Analysis, August 2021
But the polypropylene arbitrage is wide enough – second Exhibit below. We are likely not seeing much movement for a couple of reasons of which the scarcity of containers is only one. Most large buyers of polypropylene in the US take polymer by rail car and are ill-equipped to take containers. Most large buyers of polypropylene and polypropylene compound are focused on quality and consistency and adding a couple of import cargoes, would add risk in addition to the logistic uncertainties. That said, the polypropylene arbitrage is huge and we would expect to see some action as a consequence, either an increase in the import of the polymer or an increase in products that have a high polypropylene content. Volumes will likely be small unless the freight costs and other constraints ease, but when they do it would be wise to expect a major flood of product and a corresponding price correction in the US. See more in today's daily report.
Source: Bloomberg, C-MACC Analysis, August 2021