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HDPE moves below LDPE, LLDPE after almost two years in Asia

by Esra Ersöz - eersoz@chemorbis.com
  • 07/11/2019 (04:11)
Import PE prices have witnessed renewed declines this week across China and Southeast Asia on unsatisfactory demand and growing supplies. The downturn in HDPE seems to have gained momentum recently, with prices losing the premium they maintained over other PE grades after almost two years.

HDPE sees sharper downturn; LDPE feels the least pressure

In China, the HDPE film market fell by 8% on average in the past one month following the week-long holiday in early October, according to ChemOrbis Price Index. In the same timeframe, LLDPE film lost ground by 6% while LDPE witnessed the smallest decline by 3%.

Southeast Asia paints a similar picture with average prices suggesting a decrease of almost 7% for HDPE versus 5% in LLDPE and only 2% in LDPE.

Two-year premium comes to an end in China

Historically, HDPE film prices gained premium over other PE grades, particularly LDPE, first in late 2017 in China. They traded with an all-time high premium over LDPE and LLDPE throughout 2018, and maintained this premium for the large part of 2019 up until September.

Along with the sharper declines the HDPE market faced in recent weeks, ChemOrbis Price Index reveals that the average of HDPE film prices is currently way lower than LDPE film prices in China as in 2017 and before.

HDPE started to falter earlier in SEA on influx of US cargoes

The HDPE film market appears to have lost its premium over LDPE and LLDPE in Southeast Asia earlier than in China, back in the beginning of the second half of 2019. This is due to the fact that US cargoes have been flooding to Southeast Asia and putting a more visible pressure on regional import prices. From early June to October, the average HDPE price either traded at par with LDPE or stood slightly below it, according to ChemOrbis Price Index.

However, the gap has widened visibly in recent weeks to as large as $60/ton.

Growing HDPE supplies spread gloom

China renewed records with its cumulative PE imports in the first three quarters of this year, which suggests that some of these imports might not be digested yet. Year-end destocking activities of overseas suppliers are also contributing to supply pressure in place. Traders in China are reporting competitive prices for Indian origins this week while Middle Eastern and Iranian suppliers continue to dominate the Chinese market.

On top of this, domestic inventories of Sinopec and CNPC have been rising, according to weekly reports from market players, in the thick of new domestic capacities, cool weather and environmental inspections.

Southeast Asia, meanwhile, have been facing a growing pressure from the US destocking. Traders in China even heard Vietnamese traders re-exporting HDPE film from the US and the Middle East to China.

LDPE suffers less on lack of supply pressure

Given the relatively limited capacities for LDPE across the globe and hardly no new capacities, the LDPE market is poised to undergo smaller declines in the last quarter compared to HDPE and LLDPE. This is likely to push it back to its place to maintain a premium over others in Asia.
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