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China, SE Asia PE markets see fresh round of drops, bottom still out of sight

by Pınar Polat -
by Merve Sezgün -
  • 08/06/2023 (02:13)
In China and Southeast Asia’s import PE markets, prices of all grades have witnessed additional declines this week, with offers either moving below or nearing the $900/ton CIF threshold on the low ends. Players blame the persistent weakness of end demand for the continuing downslide, while an eight-week slide in ethylene prices has contributed to the bearishness.

“Converters across Asia are having a hard time maintaining a profitable business amid the global economic slowdown. Run rates at many factories have been cut in the face of a slump in orders from both local and export markets,” a trader explained.

LD, LLDPE film break below $900 in China

Hovering at a three-year low, LDPE and LLDPE film prices in China have witnessed additional decreases of $10-20/ton so far this week, with both products breaking below the $900/ton CIF mark.

The overall ranges for import LDPE and LLDPE film prices were standing at $880-940/ton and $880-930/ton CIF China, cash basis, respectively, as of June 7. Some offers from the Middle East were either at par or standing below other origins including India, the United States or the Russian Federation.

ChemOrbis data show that LDPE’s premium over LLDPE stayed stable from last week at $5/ton, the lowest level since March 2019. Under balanced market conditions, LDPE carries a premium over LLDPE and HDPE film.

Mid-Eastern LD, LL offered below $950 CIF SEA

While import LDPE and LLDPE film broke below the $900/ton level in China, they saw levels below the $950/ton threshold in Southeast Asia this week. Middle Eastern origins were offered at $940-960/ton for LDPE and at $920-960/ton for LLDPE film, all on CIF SEA, cash basis, down $20-40/ton from last week.

In Vietnam, traders reported US LLDPE film offers at as low as $900/ton CIF, while Indian LLDPE was changed hands at $920/ton CIF in Malaysia.

HDPE performs relatively better but cannot escape from losses

Outperforming LLDPE and LDPE film, HDPE film prices have managed to maintain a premium over them but still witnessed weekly decreases amid the overall bearish sentiment.

As of June 7, the overall range for import HDPE film prices were standing at $900-970/ton CIF China, cash basis, stable to $30/ton lower from last week. In Southeast Asia, prices were quoted $20-40/ton lower on the week at $960-1000/ton CIF, cash.

June signals further bearishness, traders say

Traders operating in China and Southeast Asia expect further downsides ahead, as the elusive recovery in demand coupled with an overhang of most PE grades in the regional markets is expected to keep up the bearish pressure.

A Chinese trader reported concluding deals for Middle East origin cargoes at $910-930/ton for HDPE film and $880-920/ton for LDPE film, CIF China, cash basis. “We have concluded some deals albeit for low volumes. Supply is long while demand is persistently weak. China’s economic recovery is also still uncertain. We expect the China market to keep losing ground in June.”

Another Chinese trader commented, “June is the traditional off-season for PE, so downstream orders fall short of expectations, resulting in a decrease in operating rates. Looking ahead, we think that supply and demand fundamentals will remain weak, exerting further downward pressure on spot offers.”

“Offers across all PE grades have tumbled, pressured by months of low demand, which has led to growing oversupply. Southeast Asian economies are export driven, hence demand recovery has been impacted by the global economic slowdown. Downstream production has been reduced, with some factories operating at only 60-70%. Key segments such as retail, food packaging, electronics, automotive and medical have stagnated. Converters are holding higher inventories of finished products. PE prices are likely to remain under pressure due to the lack of demand recovery,” a Singapore-based trader also noted.
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