In China, PE prices have moved up this week in both the domestic and the import market after prices had begun to show signs of softening in the previous week. Several overseas producers approached the market with increases on their July offers this week in line with surging upstream costs and improved market sentiment.

A source at a Middle Eastern producer reported that the company has announced their July offers at $1840-1850/ton CFR CMP for both HDPE and LLDPE film, $140-150/ton above their June offer levels. Meanwhile, a Qatari producer announced their new LDPE offers at $1915/ton, $30/ton above their initial July offers. In addition, a Taiwanese producer reported their new offers for July at $1920-1930/ton for both LLDPE and HDPE film, $75-80/ton above their initial July offer levels. Sources attributed the renewed upward movement in prices to higher upstream costs, with crude oil futures settling above the $140/barrel mark for the first time this week while Asian ethylene prices also remained at record high levels. In addition, several overseas producers stated that they are feeling free from inventory pressure at the moment, adding that they have diverted part of their allocation to Southeast Asia, where they report that comparatively better margins are available.

However, traders are not feeling nearly as optimistic regarding the market’s prospects as overseas producers are. Traders report that buyers in China are unable to continue absorbing such large price increases, while speculating that producers will need to lower their offers before they can reasonably expect to make sales.

In accordance with their relatively less optimistic forecast regarding China’s PE market, offers from traders are currently well below offers from producers for all PE products. In the LDPE market, offers from overseas producers currently stand at $1915-1950/ton CFR CMP, while offers from traders stand $45-50/ton lower at $1870-1900/ton with the same terms. For HDPE, offers from producers were reported this week at $1840-1930/ton CFR CMP, while offers from traders were $40-70/ton below this level at $1800-1860/ton with the same terms. Some traders even stated that the price range for prompt cargoes, which currently stands at $1770-1820/ton FCA China, is a better representation of the current market situation. These traders added that transactions are slow even at this price level and felt that it would be extremely difficult to achieve done deal levels at the prices currently being sought by overseas producers. In the LLDPE film market, offers from producers stand at $1840-1930/ton on CFR basis, while traders are offering $40-60/ton below this level at $1800-1870/ton with the same terms.

A similar situation is in place in China’s domestic market, where distributors feel that current producer offers are unworkable given the current state of demand, which remain sluggish in China. In accordance with this fact, distributors are unwilling to offer at prices above the high end of the offer range of domestic producers, despite the fact domestic producers either left their offers unchanged this week or even attempted slight increases. High end prices from distributors were reported at prices CNY100-300/ton ($15-44/ton) below high end offers from domestic producers this week, with high end offers for locally-held import material also hovering at prices at or only slightly above high end prices from domestic producers.

This disparity in sentiment amongst sellers makes it difficult to predict price trends in China’s PE market over the near term. Sources in the market report that traders and distributors are operating with limited stocks as they have only been purchasing in small amounts during the recent run up in prices. However, as converters and re-exporters have similarly restricted their purchasing and are also maintaining a needs only purchasing strategy, buyers anticipate that they will be able to meet their requirements from traders for the time being as they await more reasonable offers on the part of producers, highlighting that the recent series of price hike increases from producers has not successfully tempted buyers into the market despite the strong sentiment in place on the producers’ side.

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