China, SE Asia import PE markets up after several months, sustainability under discussion

Import PE film prices in both China and Southeast Asia have staged a mild rebound this week, after following a stable to lower trend since around early October. The renewed confidence among sellers is attributed to the recent strength in energy futures and positive macroeconomic conditions, particularly in China.

Major import suppliers cautiously increased their prices in both markets, gauging the response in the face of consistently low buying interest. According to the ChemOrbis Price Index, CIF prices for all PE film products have risen after hitting the lowest levels in about four to five months.

Weekly assessments indicate increases of up to $30/ton

The weekly price ranges for all origins have been assessed with increases ranging from $10/ton to $30/ton compared to last week. In China, the assessment levels for the current week are at $950-1010/ton for LDPE film, $930-990/ton for HDPE film, and at $900-970/ton for LLDPE film, all on CIF, cash basis. As for Southeast Asia, the assessed ranges stand respectively at $930-1030/ton, $970-1020/ton, and at $940-1000/ton, all on CIF SEA, cash basis.

“The latest hikes are because producers have not hiked offers over the past few months and have suffered margin losses. They are attempting to recoup earlier losses through higher offers for January,” a regional representative of a Middle Eastern PE producer said.

Sellers encouraged by external factors

Energy futures and global oil supply concerns

One of the key factors bolstering sellers’ confidence is the recent rebound in crude oil prices. This upswing has been primarily fueled by concerns surrounding the global oil supply chain, especially in the wake of attacks on shipments in the Red Sea.

Brent crude oil futures settled at $79.70/barrel on December 20, reflecting a significant 7% increase from the previous week. This recovery follows a six-month low of $73.24/barrel on December 12, driven by oversupply concerns and weakened demand aspects.

PBOC’s strategic cash injection

The People’s Bank of China (PBOC) injected a noteworthy 800 billion yuan ($112 billion) in one-year loans to commercial lenders. This move, the largest injection of medium-term policy loans to date, has bolstered economic sentiment among sellers. China’s industrial output also witnessed a positive uptick, recording a 6.6% increase in November year-on-year after a 4.6% rise in October, exceeding market expectations.

Demand concerns loom, casting a shadow on sustainability

Despite the positive external factors, concerns persist regarding the sustainability of the recent rebound in PE prices. The subdued buying appetite continues to be a cause for worry among sellers. While macroeconomic policies and the ongoing rally in futures prices may provide temporary support, converters, in particular, remain skeptical.

A Vietnamese trader noted, “Overall demand remains lackluster, but more buyers are seeking offers this week, possibly due to concerns about potential price increases. However, once they receive higher offers, they tend to retract and become hesitant. It may be challenging to increase prices at this time.”

The supply-demand dynamic in the PE market is anticipated to remain weak, with attention turning to potential growth in domestic supply in China due to fewer maintenance activities. This fundamental aspect, coupled with resistance from buyers, poses challenges to sellers’ attempts at further price hikes in the Asian market.