China’s LDPE film market continues to soften from multi-year highs

In China, the domestic LDPE film market has been tracking a softening path since it reached a four-year high in early December. Import prices have followed suit, and seen corrections after hitting highest levels in more than five years.

According to data from ChemOrbis Price Index, the weekly averages of LDPE film prices on CIF/ex-warehouse China basis have lost 5-6% since early December. For the current week, the overall price ranges were assessed at $1320-1360/ton CIF China, cash and at CNY10600-10850/ton ($1450-1485/ton without VAT) on ex-warehouse, cash inc. VAT basis.



Price corrections continue despite still-limited supply, firm costs

The price corrections came despite ongoing supply limitations for LDPE. Players in China reported that both domestic and import availability was still low but this was offset by waning demand.

Meanwhile, global crude oil futures remain firm, hovering around $53/barrel for WTI and $56/barrel for Brent. The weekly average data from ChemOrbis Price Wizard show that the recent figures pointed to the highest levels since mid-February.

As for ethylene, spot prices on CFR China basis are currently standing at $1060/ton, the highest level since March 2019.

LDPE saw rapid hikes in April-November

One of the key drivers behind the successive price corrections is the fact that LDPE prices increased at a faster pace than HDPE and LLDPE film during the May-November uptrend.

ChemOrbis Price Index data reveal that the weekly averages of HDPE and LLDPE film prices on CIF China basis gained 58% and 50%, respectively, during the April-December uptrend period while LDPE surged 92%.

As a result of rapid hikes, LDPE film moved significantly above HDPE and LLDPE film prices in the second half of 2020. Currently, the price gap between LDPE and HDPE film stands at around $360/ton.

“LDPE film prices are seeing healthy corrections since they increased rapidly in the previous months due to tightness. We might see additional reductions in prices over the near term as the current offer levels are still quite high,” a few players commented.

Demand subdues amid upcoming holiday, COVID-19 spike

LDPE film prices started to see downward corrections in early December after reaching multi-year highs since demand started to falter amid year-end lull. Sentiment failed to improve in the first two weeks of 2021 due to lower-than-expected pre-holiday replenishment.

A recent spike in fresh COVID-19 cases in the country has exacerbated weak demand conditions.

“Demand has weakened since downstream manufacturing activity has slowed ahead of the holiday season. The resurgence of the pandemic has also weighed on the demand outlook,” a trader noted.

Meanwhile, some traders in China were reportedly trying to re-export their LDPE materials to Southeast Asia. “Due to better netbacks, sellers are redirecting cargoes to Vietnam. However, it is not that easy nowadays due to the shortage of vessels,” a seller commented.