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Import PE film prices at around-six-month highs in China and SE Asia

by Thi Huong Nguyen -
  • 25/09/2023 (02:25)
In China and Southeast Asia’s import PE film markets, prices of all grades witnessed additional increases last week, tracking a stable to slightly higher movement for 10 straight weeks. ChemOrbis Price Index reveals that PE film prices in both markets have hit their around-six-month highs on average, while the average price of HDPE film on CFR China has reached the highest level since late July 2022.

PE – China – Southeast Asia

LDPE regains premium over HDPE

Under balanced market conditions, LDPE film prices usually carry a premium over the prices of HDPE film. However, China witnessed HDPE film mostly trading above LDPE film from the second half of May to the end of August. After regaining the traditional premium in the week ending on August 31, LDPE film currently stands at $10/ton higher than HDPE film in China.

In Southeast Asia, LDPE film largely experienced a discount against HDPE film in the past four and a half months. This week has seen HDPE film prices losing their premium over LDPE film, with both grades trading at par with each other.

Cost support remains the heartbeat of the markets

Strong feedstock costs - as a result of higher crude oil values - remain in the spotlight, bolstering import PE prices in recent weeks. A source at a producer said, “Producers manage to hold on to high levels and intend to raise prices further due to cost pressure and margin losses.”

This week, with Brent crude futures staying above the $90/bbl mark and regional olefin supply tightening, ethylene prices have moved north further and provided stronger cost support to downstream PE markets. The prices are currently assessed at $895/ton CFR Southeast Asia and $870/ton CFR China, having risen by $25-30/ton from the previous week. Ethylene prices have risen by 21% since mid-June, according to ChemOrbis data.

Some lights in supply-demand fundamentals

Even though the overall demand situation remains unsupportive of the current uptrend, there are still some slight improvements observed in the region, especially in China due to pre-holiday replenishment and peak season. A Chinese converter said, “Demand has increased across the key application sectors because of restocking ahead of the impending holidays. The high season for greenhouse films has also boosted agricultural demand.”

The supply side exerts no pressure on the markets, while talks of shutdowns in Southeast Asia and reducing availability in China underpin sentiment to some extent. A Singaporean trader reported, “Buying enthusiasm strengthens in Indonesia on the back of tightness caused by a plant shutdown.”

Meanwhile, active seasonal purchases have contributed to China’s lower availability, while LDPE supply is said to remain short. “Supply has reduced slightly due to the approaching Mid-Autumn and Golden Week holidays, which have prompted downstream factories to stock up,” a trader reported.

Expectations of China’s economic recovery aid sentiment

The Chinese government’s series of stimulus policies have provided Asian players with a glimmer of hope. The country’s PBOC has introduced new policies and cut key interest rates several times over the year to encourage domestic consumption and spending, helping to boost the economy. Although more time is needed to prove the macroeconomic influences on polymer sectors, market confidence has been somewhat revived with expectations of a better trading environment.

A Chinese converter comments, “Market participants believe the cumulative monetary policy measures will lift China’s economy and demand by the year end.” Besides, a regional representative of a Middle Eastern producer also concurs, “China’s interest rate cuts are likely to stimulate domestic consumption, which will be reflected in a strong recovery in the country’s polyolefin markets.”
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