China’s import PE markets keep falling; LD film breaks below $1100 CIF threshold

PE sentiment in China has been mostly downbeat since the beginning of this month, weighed down by sluggish demand and ample availability. Although strong costs in terms of high freight rates and ethylene feedstock have remained supportive, a stable-to-lower trend has continued to reign over the markets.

Supply rises, and demand stays weak

Downstream sectors have kept underperforming with lower run rates and sales pressure amid the off-season for most PE applications, according to market sources. This has led to a high inventory of finished goods at factories, dampening their buying interest in polymers. Buyers’ anticipation of lower prices has also exerted additional pressure on PE sellers.

“Manufacturing operations at downstream factories remain at reduced levels. Buying volume has still been tied to basic needs since converters struggle to sell their end products,” said a trader. A converter opined, “Converters are showing reluctance to high levels due to a bearish outlook. Downstream orders have stayed poor, and operating rates have been cut, limiting demand for raw materials.”

Supply has expanded at home due to fewer maintenance shutdowns, while players reported an increasing number of import shipments. Another trader commented, “Some plants resume operations after turnarounds. Additionally, more arrivals of imported materials, especially low-priced US cargoes.”

Meanwhile, ChemOrbis Production News Pro suggests that roughly 2.5 million tons of combined PE capacities were removed from China’s PE market in Q2’s heavy turnaround, while the capacity losses were expected to fall to about 784,000 tons this month and a lower level of 523,000 tons in August. The loss will be even more negligible during the remaining part of the year, the data also shows.

CIF LD offers below $1100 reappear

After losing momentum in late June, the LDPE “fever” eventually ended in mid-July. ChemOrbis Price Index data suggests that the weekly average level of imported LDPE film has fallen by around 6% over the past three weeks.

At the beginning of the current week, a trader operating in Guangzhou reported receiving an LDPE film offer for a Mid-Eastern origin at $1070/ton CIF, cash. “The offer is down $30/ton from last week. All PE prices are falling, but the downtrend is most visible for LDPE film, which had seen sharper gains compared to the other film grades earlier,” he noted. Meanwhile, on Monday, a major Saudi Arabian producer revealed its August PE offers to China with significant monthly decreases for LDPE film. The offers were down by $80/ton from July to $1120/ton CIF, cash.

HD and LL at multi-month lows

HDPE film has remained the weakest among the three main PE film grades. The weekly average of import prices for all origins has continued to hover around its lowest levels in more than seven months. Competitive US offers at $910/ton have formed the low end of the range for the past three weeks.

As for LLDPE film, the import market has seen fresh drops this week, declining to around five-month lows as per ChemOrbis Price Index data. Traders reported Saudi LLDPE film offers at as low as $920/ton CIF China, cash.

Local prices follow Dalian futures lower

Adding to that gloomy picture of supply and demand was the continuous slide in futures prices, which dampened sentiment in spot markets. During the week ending on July 26, the local prices of three main PE film grades moved south further, with LDPE film seeing the most visible decreases of up to CNY200/ton ($29/ton).

September LLDPE futures on the Dalian Commodity Exchange have relentlessly dropped since July 4, except for a higher settlement on July 17. Following nearly a month of decline, the futures prices posted a cumulative loss of CNY402/ton ($55/ton) as of July 29.