Higher freights keep Asia’s import PE markets firm but downstream signals weak
by Shibu Itty Kuttickal - sikuttickal@chemorbis.com
A cautious uptrend continued in Chinese import PE markets for the fourth week in a row, while the Southeast Asian ones were flat after a surge in the previous week. Higher freight costs kept the sentiment in both the markets upbeat, but traders are concerned the lack of strong uptakes in the downstream may not sustain the upward momentum.
In China, producers said there was limited support to their hike moves, although agreeing that rising costs were the major reason for the upward adjustments. The number of PE offeres dwindled, squeezing import supplies in China. A converter in China said, “The Red Sea tensions have been impacting freight rates and causing shipping delays.”
Although ethylene prices had retreated because of slowing demand, higher crude and other feedstocks, such as ethane and naphtha, have raised costs for producers over the medium term. But crude prices have been volatile. On Friday, Brent crude futures settled at $78.29/barrel, showing a negligible slide from $78.76/bbl a week ago. On a month-on-month basis, it showed a 2% rise, while from two months ago, it showed a 3% fall.
Chinese players: It’s not stocking-up time yet
Downstream players in China were still only focusing on purchases for immediate requirements and kept resisting high-priced PE offers. “We don’t see any build-up of stocks happening,” a converter said.
A source from a PE producer pointed to deadlocked negotiations. “The bid-sell window for most grades, except perhaps for HDPE pipes, have closed and are waiting to be opened as the current sentiment is weak,” he said.
Opposing factors remain at play in the market, with the supply pressure continuing in China given fewer maintenances and slow uptakes, on the one hand, and import supplies crimping because of a decrease in imports from the Middle East due to the Red Sea tensions and shutdowns in the region. And, going by the current trend, some players do not expect a revival in demand ahead of the Lunar New Year holidays. “The hope is that a revival could happen post the holidays,” said a Chinese representative of a South Korean trader.
Freight costs support SEA import levels
In Southeast Asia, sellers see renewed confidence amid rising freight costs and possible supply disruptions from the Middle East, despite buyers not being convinced of a sustained demand recovery. All PE prices were noted close to three-month highs last week, according to ChemOrbis Price Index data.
Players in the region said sellers have tried to keep raising prices, but not many of these had resulted in deals, as buyers kept resisting any increases. “There is resistance to offers above the $1000/ton mark. Some sellers have agreed to revise their offers downwards, but others are holding on to them,” a trader in Vietnam said. His compatriot, a converter, was not planning to replenish anymore because of high inventories. “The Red Sea problem has affected our business too as we’re finding it difficult to export our end products to Europe,” he added.
Middle East producers pointed to turnarounds coming up in the region to tighten the market somewhat, but also pointed to the fact that most of Asia was getting ready for a long holiday. “So not many are interested in replenishing now. The post-CNY market trend is unclear, as economies are still weak. The tensions in the Red Sea and the slowdown in China have only complicated the sentiment,” a regional agent of a Mid-Eastern producer said. He expected prices to stay flat to firm till the CNY holidays.
“Rising freight rates have also added to overall costs, apart from tightening Mid-East supplies as more plants start maintenance turnarounds in the second and third quarters,” said another regional representative of a major Mid-Eastern producer. However, buyers had been reluctant to accept the higher prices, and demand had weakened in Western markets because of recession and inflation. "Demand in Asia isn’t good either. But as freight costs increase, and shipments get lesser because of the ongoing problems in the Red Sea, the weak demand could balance out the tighter supplies,” he said.
Global container freight indices keep rising
Meanwhile, freight benchmarks have not shown any let-up in their uptrends. According to shipping consultancy Drewry, the global container freight index has been steadily increasing since late-November, although the ocean shipping markets saw a notable jump in early-January. Following a spike of more than 100%, freight rates from China to Northwest Europe increased by 23% last week to $4406/FEU while the rates on China – South Europe also rose by 15% to $5213/FEU as of January 11.
Freightos, another shipping consultancy, also raised its benchmarks last week, albeit at a slower pace. The China/East Asia - North Europe index was up by 8% on the week to $4747/FEU while the index to Mediterranean was also up by 5% to $5307/FEU as of January 12.
In China, producers said there was limited support to their hike moves, although agreeing that rising costs were the major reason for the upward adjustments. The number of PE offeres dwindled, squeezing import supplies in China. A converter in China said, “The Red Sea tensions have been impacting freight rates and causing shipping delays.”
Although ethylene prices had retreated because of slowing demand, higher crude and other feedstocks, such as ethane and naphtha, have raised costs for producers over the medium term. But crude prices have been volatile. On Friday, Brent crude futures settled at $78.29/barrel, showing a negligible slide from $78.76/bbl a week ago. On a month-on-month basis, it showed a 2% rise, while from two months ago, it showed a 3% fall.
Chinese players: It’s not stocking-up time yet
Downstream players in China were still only focusing on purchases for immediate requirements and kept resisting high-priced PE offers. “We don’t see any build-up of stocks happening,” a converter said.
A source from a PE producer pointed to deadlocked negotiations. “The bid-sell window for most grades, except perhaps for HDPE pipes, have closed and are waiting to be opened as the current sentiment is weak,” he said.
Opposing factors remain at play in the market, with the supply pressure continuing in China given fewer maintenances and slow uptakes, on the one hand, and import supplies crimping because of a decrease in imports from the Middle East due to the Red Sea tensions and shutdowns in the region. And, going by the current trend, some players do not expect a revival in demand ahead of the Lunar New Year holidays. “The hope is that a revival could happen post the holidays,” said a Chinese representative of a South Korean trader.
Freight costs support SEA import levels
In Southeast Asia, sellers see renewed confidence amid rising freight costs and possible supply disruptions from the Middle East, despite buyers not being convinced of a sustained demand recovery. All PE prices were noted close to three-month highs last week, according to ChemOrbis Price Index data.
Players in the region said sellers have tried to keep raising prices, but not many of these had resulted in deals, as buyers kept resisting any increases. “There is resistance to offers above the $1000/ton mark. Some sellers have agreed to revise their offers downwards, but others are holding on to them,” a trader in Vietnam said. His compatriot, a converter, was not planning to replenish anymore because of high inventories. “The Red Sea problem has affected our business too as we’re finding it difficult to export our end products to Europe,” he added.
Middle East producers pointed to turnarounds coming up in the region to tighten the market somewhat, but also pointed to the fact that most of Asia was getting ready for a long holiday. “So not many are interested in replenishing now. The post-CNY market trend is unclear, as economies are still weak. The tensions in the Red Sea and the slowdown in China have only complicated the sentiment,” a regional agent of a Mid-Eastern producer said. He expected prices to stay flat to firm till the CNY holidays.
“Rising freight rates have also added to overall costs, apart from tightening Mid-East supplies as more plants start maintenance turnarounds in the second and third quarters,” said another regional representative of a major Mid-Eastern producer. However, buyers had been reluctant to accept the higher prices, and demand had weakened in Western markets because of recession and inflation. "Demand in Asia isn’t good either. But as freight costs increase, and shipments get lesser because of the ongoing problems in the Red Sea, the weak demand could balance out the tighter supplies,” he said.
Global container freight indices keep rising
Meanwhile, freight benchmarks have not shown any let-up in their uptrends. According to shipping consultancy Drewry, the global container freight index has been steadily increasing since late-November, although the ocean shipping markets saw a notable jump in early-January. Following a spike of more than 100%, freight rates from China to Northwest Europe increased by 23% last week to $4406/FEU while the rates on China – South Europe also rose by 15% to $5213/FEU as of January 11.
Freightos, another shipping consultancy, also raised its benchmarks last week, albeit at a slower pace. The China/East Asia - North Europe index was up by 8% on the week to $4747/FEU while the index to Mediterranean was also up by 5% to $5307/FEU as of January 12.
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