Downward pressure persists in China’s PE markets

PE market in China has steadily moved south for a month, with prices hitting the lowest levels since late July/August. Although rising futures prices over the past two weeks and the latest increase in ethylene feedstock costs have somewhat underpinned sentiment lately, PE situation has remained gloomy on the back of a slowdown in demand and a lack of supply concerns.

Import LLDPE’s discount against LDPE, HDPE widens

During the week that ended on November 3, import PE prices were assessed stable to $20/ton lower at $950-1040/ton for LDPE film and $940-1000/ton for HDPE film, and $10-20/ton lower at $890-960/ton for LLDPE film, all on a CIF China, cash basis. LLDPE film witnessed the absence of levels above the $1000/ton mark after the recent price cuts.

Data obtained from ChemOrbis Price Index suggests LDPE film was trading with a year-to-date high premium of $70/ton over LLDPE film. Meanwhile, the latter’s discount against HDPE film has widened to $45/ton, indicating the largest delta since early September 2020.

Domestic price declines slow down

As for the same week, domestic prices were assessed stable to CNY80/ton ($11/ton) lower for LDPE film at CNY8400-8770/ton ($1017-1062/ton without VAT) and LLDPE film at CNY7990-8335/ton ($967-1009/ton without VAT), and stable for HDPE film at CNY8400-8800/ton ($1017-1066/ton without VAT), all on an ex-warehouse, cash basis.

During the four-week slide, LDPE noticeably saw the largest cumulative losses after outperforming other grades in the previous uptrend, thanks to its slight tightness.

In the meantime, the pace of decrease in the domestic market decelerated last week as rising LLDPE futures prices on the Dalian Commodity Exchange underpinned the sentiment of spot players to a certain extent. Besides, purchasing activity was also noted for domestic PE materials, with a converter saying, “The only limited buying power appears to happen in the local market.”

Poor demand still casts a pall on the outlook

PE market participants previously expected some improvements in demand in light of an e-commerce festival, which might encourage downstream production and replenishment, but the facts have proved that the recovery fell short of expectations. A trader commented, “The overall operating rates in various downstream sectors will decrease slightly. Factories are adopting a strong wait-and-see stance, leading to a limited increase in demand.”

In addition, the preparation for the year-end holidays failed to result in significant improvement in buying enthusiasm, with the trading atmosphere returning to a quiet mode after a few days of replenishment, according to players.

The end of the peak season, which comes sooner when compared to the previous year, also contributes to demand concerns. “This year’s peak season of “Golden September, Silver October” ends faster than normal. Buyers approach the market with caution and purchase for basic requirements only,” said another trader.