Futures-driven hikes return to China’s local PE markets

Amid opposite factors, China’s domestic PE markets have seen notable price fluctuations recently, with LDPE film reversing last week’s losses as most sellers adopted a bullish stance. Following a mostly steady trend in the previous week, local prices have climbed across various PE grades amid support from stronger futures and firm costs.

The latest domestic offers have shown an uptick of CNY20/ton ($3/ton) on the low end of the HDPE film range, while LDPE film’s low end has risen by CNY170/ton ($23/ton). LLDPE film has witnessed increases of CNY70-200/ton ($10-28/ton) on both ends.

Futures and costs bolster prices

A trader based in Longkou reported, “Unlike PP and import PE markets, which are largely stable, domestic PE prices noticeably rise by up to CNY200/ton in line with a stronger futures market.” He added, “Supply and demand conditions are relatively unchanged when compared to last week. Demand is generally stagnant, whereas short-term supply pressure is manageable thanks to turnarounds.”

On a weekly comparison, January LLDPE futures on the Dalian Commodity Exchange continued to increase by CNY143/ton ($20/ton) as of November 20. Additionally, firm ethylene feedstock prices—hovering around a two-month high of $870/ton CFR China—contributed to the bullish sentiment, despite volatility in crude oil futures.

Weak fundamentals persist, but bright spots emerge

While players remain wary of weaker fundamentals driven by the off-season, plant restarts, and China’s Q4 PE capacity expansion of 3.95 million tons/year, some factors provide a counterbalance:

Year-end buying activity

Early procurement ahead of the Spring Festival has spurred modest improvements in demand for film applications. The retail, food, and pharmaceutical sectors also contributed to steady interest. A trader remarked, “Although purchases remain limited, demand has slightly picked up due to early preparations for Lunar New Year.”

Controlled domestic availability

In addition, domestic availability has been under control as many production lines have undergone maintenance shutdowns. According to market sources, the two major local producers’ combined polyolefin inventories were 660,000 tons on November 20, decreasing by 20,000 tons weekly and 25,000 tons daily.

Depreciating yuan contributes to higher pricings

Meanwhile, offers for locally held shipments originated from the Middle East and India have also benefited from the ongoing depreciation of the yuan against the US dollar, with noticeable increases for these offers when compared to last week. Typically, a weaker yuan increases inventory replacement costs in local currency, leading sellers to adjust prices upward to safeguard profit margins.