Dull demand dents PE outlook in SE Asia for rest of year

A bearish sentiment continues to sweep across PE markets in Southeast Asia, mostly as a result of stagnant demand with year-end requirements staying suppressed although upstream costs have risen of late. As a revival in demand is not expected any time soon, the markets are likely to keep softening ahead. The China market has also pressured Southeast Asia further.

As per ChemOrbis Price Index data, the price of LLDPE film saw the largest fall of about 13%, while LDPE and HDPE film fell by 8-9% over the last two months. LLDPE film prices are currently noted in a $920-970/ton CIF range based on prices noted so far this week, while LDPE film prices are in a $950-1000/ton range and HDPE film in a $960-1020/ton range, all on a CIF Southeast Asia, cash basis. HDPE blow moulding prices have also fallen by about 13% over the same period to $900-940/ton CIF.



Buyers playing coy as prices seen falling ahead

"The market conditions for most plastics and polymers are weak, as we see it. The prices of most products, including PE and also ethylene vinyl acetate (EVA) are falling. For swing producers of EVA and LDPE, there seems to be nothing to fall back to currently,” a Vietnamese trader said. EVA prices in China have fallen over the past two months by about 16% for lower-content (<18%) EVA and by 13% for the high-content (>18%) material.

Traders said most prices continued to slide although sellers did try to keep prices firm for the current week. “The point is buyers are playing coy as they expect prices to fall further, and demand remains sluggish. Nobody is interested in buying. We feel prices can still fall another $50/ton in the near term,” another trader in Vietnam said. A converter, also Vietnamese, said this was the first time that his company didn’t have an incremental increase in sales for year-end offers. “So, we prefer to buy on a need-to basis and stay mostly on the sidelines,” he added.

No demand revival in sight

Traders in the region also did not expect a recovery in the PE markets in the near term although not many were predicting a big swing downwards. A converter based in the Philippines said, "Spot prices of PE may mostly move sideways, although we do see a limited downside ahead. Higher feedstock costs may limit the extent of further decreases.”

Ethylene prices have held steady for the last couple of weeks, after rising by about 27% since mid-June to $940/ton CIF Southeast Asia and to $870/ton CIF China. On the other hand, Brent crude futures were about 10% lower than levels noted a couple of months ago.

Chinese re-export possibility looms large

The sluggish sentiment for PE in China was also putting pressure on Southeast Asian markets, as there is a concern that this could lead to an increase re-export business from the mainland to the region. In China, a source at a Taiwanese producer said while his company’s posted offers were stable, a $10-30/ton discount could be offered in negotiations. “Both export and local demand are weak. Export demand is especially feeble, compared to previous months, as prices offered are still on the higher side,” he said.

He also pointed out that Chinese local prices were cheaper than imported material. “So naturally, we see people sourcing more from the local markets,” he added.