Are polyolefin prices really set to rebound in Southeast Asia?

Do the slow declines in LDPE film and LLDPE film prices, and the firm low ends in PP point to signs of a bottom in sight for these markets in the near term? There are definitely voices in the wilderness raising this question in light of the latest week’s price trends.

Despite overall demand remaining dull in the region, the current week has seen a definite retardation in the decline in prices of LDPE and LLDPE.

Slow grind in LD, LL price declines

In about four months from early February, ChemOrbis Price Index data shows LDPE prices falling at an average of about $12/ton a week, compared to the $5/ton in the latest week. LLDPE fell by $10/ton in the latest week, around the same as the four-month average weekly decline, but it is still lower when compared to the $18/ton average for about one month now. At the same time, HDPE prices, which have fallen by an average $9/ton in the last four months, have seen prices fall by $40/ton in the latest week.

Import LDPE film prices for all origins for the week were stable to $10/ton lower from last week to a three-year low at $930-990/ton CIF Southeast Asia, cash. Import LLDPE film prices for all origins were stable to $20/ton lower at $900-990/ton CIF, cash. HDPE prices though fell by a steep $40/ton to $920-980/ton CIF SEA, cash.


PP low ends remain firm

As for PP, block copolymer injection and homopolymer raffia markets remained on the slide for the fifth week on the trot. At the same time, import PP offers were stable on the low end, raising questions about resistance to further price falls in the trend line ahead. Import homo-PP raffia and inj. prices for all origins were stable to $10/ton lower from last week at $870-940/ton CIF Southeast Asia, cash, while PP block copolymer inj. prices for all origins were also assessed stable to $10/ton lower from last week at $930-1000/ton CIF, cash.

Against this background, some market players in Southeast Asia are looking to China to help trace a possibly positive direction ahead. PP prices in China mostly hovered around last week’s levels with some minor fluctuations. Persistent demand weakness stayed as an obstacle, but the rise in Dalian futures in the mid-week and market buzz about new stimulus policies from the government may have helped to shore up sentiment somewhat in the local market, raising hope among players.

Some see a bright side of Chinese PE market

In PE, optimists in Southeast Asia saw a silver lining in a slight increase in China’s local prices as also import price falls losing momentum.

Import LDPE film prices in China lost downward momentum this week even as the overall sentiment continued to face headwinds from weak demand amid ample supplies and falling feedstock costs. An oil-driven increase in the Dalian futures prices also lent support to local prices.

But fundamentals remain unchanged

But others are pointing to unchanged fundamentals in the market that may keep prices on the downtrend at least for the near term. In fact, there are not many market participants betting on an upside to the polyolefin markets in the near term.

Among the fundamentals, demand for polyolefins from converters has remained sluggish since the beginning of the year and there’s no indication of a revival yet. The weak economic situation has taken a toll on the demand for finished products in the regional markets in Southeast Asia and China. Many downstream operators are thought to be working at run rates of less than 80% as demand is yet to reach pre-COVID levels. Such a situation has also meant ample availability of PP and PE in the regional markets, with homes being sought regularly for the ample surpluses in China.

And the continuous fall in olefin prices also needs to be mentioned. ChemOrbis data suggest that ethylene prices have fallen by about 23% since the first week of April, while propylene has seen prices tumbling by 23-24% since the second week of April, taking away from sellers a major factor for increasing prices. At the current $720-730/ton CFR China levels, both ethylene and propylene prices are at the lowest since May-June, 2020.