Compliance woes spook Indian polyethylene participants

Indian polyethylene (PE) market participants are starting to feel the heat, with just over a month to a deadline to comply with new standards introduced by India's Bureau of Indian Standards (BIS).

Foreign PE producers were given 180 days from the announcement in April to comply with the standards.

Key exporters to India have made offers for September and deals are being concluded. But the looming uncertainty around the enforcement of the BIS standards has made these producers uneasy, with many of them continuing to conclude deals but delaying the shipment of cargoes to India until some certainty is established.

The main cause of the uncertainty stems from one of the BIS stipulations that requires plant inspections by Indian officials to ensure that the resin production process complies with standards set out by the BIS. Participants have echoed that the 180-day window was insufficient to ensure compliance and to obtain the necessary approvals. The Covid-19 pandemic has also made travelling difficult, with each country having its own set of quarantine and vaccine requirements.

Offers from key producers for September opened slightly higher, with most Middle Eastern producers increasing offer prices by about $20-30/t from a month earlier across all PE grades. Buyers have been spooked by the looming BIS deadline and are booking cargoes early to avoid any potential price hikes if a shortage arises because key Middle Eastern producers are not allowed to export to India for failing to meet the requirements.

Hurricane Ida is also another concern for south Asian buyers. The resulting production losses coupled with lower freight rates from the Middle East to the Americas compared to rates from the Middle East to Asia may incentivise Middle Eastern producers to divert volumes intended for south Asia to the Americas, on higher netbacks should the shortage continue for an extended period.

Market participants feel that Indian officials are likely to extend the deadline. Plant inspections have yet to begin, according to market participants.

By Matthew Rajendra