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Bullish sentiment for PE cools off across globe, LD remains resilient

by Manolya Tufan - mtufan@chemorbis.com
  • 09/11/2020 (04:04)
The bullish sentiment in global PE markets faltered recently, while LDPE continued to fare better than other PE grades across the board. LDPE prices either stabilized or posted increases in major markets as ongoing tightness for this grade cushioned the impact of waning demand amid upstream volatility and a second wave of the coronavirus pandemic.

End of high season in China weighs on demand

The overall PE sentiment in China faltered amid waning demand due to the end of high demand season. The bullish rally also cooled off amid a nascent relief in supply levels, the upcoming start-ups and lower spot ethylene prices.

Players see import LDPE prices stabilizing at around two-and-a-half-year high despite the above mentioned factors as this product was relatively stronger than other PE grades. Data from ChemOrbis Price Index revealed that the weekly average of import LDPE prices for all origins stabilized at $1195/ton CIF last week. Meanwhile, slight downward revisions continued to be reported for HDPE and LLDPE grades.

LL, HD yields to weak demand in SEA

In Southeast Asia, import prices followed a similar trend as lower availability propped up LDPE, while other grades yielded to growing buyers’ resistance amid weak spillover sentiment from China. The weekly average of import LDPE prices for overall origins has stabilized at $1170/ton CIF, the highest level since late August 2018.

LD mostly absorbs Nov hikes in Turkey

Reduced import quotations and poor netbacks paved the way for increases in Turkey , while many sources reported that LDPE fared better than other grades amid tightness.

The weekly average of Mid-eastern LDPE film prices saw a weekly increase of around $25/ton to be quoted at $1070/ton CIF Turkey, cash basis.

Players reported that LDPE mostly absorbed increases amid deals on the low ends of the ranges. Meanwhile, buyers’ reaction to the LLDPE hikes has been lukewarm based on comfortable supplies amid comments that initial hikes may not be fully absorbed. The depreciation of the Turkish lira continued to affect PE manufacturers more profoundly, while buying appetite was also curbed by the low season for certain applications around the corner.

Supply limitations support hike attempts, European buyers push for rollovers

After European PE markets defied the global firming trend in September and October, suppliers took a firmer stance particularly on their LDPE offers as supplies for this grade are tighter. European suppliers sought rollovers to €10-20/ton hikes due to a combination of low netbacks, higher exports, the lack of imports and regional production hiccups.

Yet, buyers mostly expect to close their November deals with rollovers amid stable ethylene contracts. Plus, they stick to needs only purchases amid uncertainties related to renewed lockdown measures. They argued, “It is still early to talk about a reversal of the PE trend. Diminishing supplies are awaited to prevent prices from falling further rather than pushing them up.”

LDPE soars the most in Egypt

In Egypt, a similar panorama was observed with LDPE prices posting more remarkable hikes than LLDPE and HDPE did.

Supported by tightness, import LDPE prices saw hikes of up to $100/ton in November to bring the average of import prices to $1140/ton CIF Egypt last week. Suppliers were not open to negotiate as they allocated limited volumes for the Egyptian market. Yet, buyers grow cautious amid volatile crude oil futures and concerns over renewed COVID-19 related restrictions.

Volatile crude, 2nd wave dent confidence

The majority of global PE markets have been on an upward trend for several months. Successive hikes are putting pressure on demand, while fluctuating oil prices and a second wave of the coronavirus pandemic cast a cloud over the global outlook in the medium term.

PE buyers were seen limiting their purchases due to concerns over consumption and economic recovery amid re-introduced restrictions and approaching year-end. Fading demand may take the edge off tightness, according to some players. Meanwhile, resumption of PE production in the US after the end of hurricane season is closely tracked as players expect to see a gradual increase in exports from the US.

Spot ethylene down on better availability

Global ethylene markets have been on a downward trend amid increasing supply levels, which was another factor keeping PE buyers on their toes.

According to ChemOrbis Price Wizard, spot ethylene prices on CFR China basis declined by $125/ton from a month earlier while prices on CFR SEA basis fell by $95/ton from three weeks ago.

Prices on FD USG basis were down by $105/ton in the past two weeks. Meanwhile, ethylene prices on FD NWE basis declined by €20/ton ($24/ton) in the past three weeks.
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