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Import PE markets give softening signals in China, SE Asia

by Merve Sezgün -
  • 24/07/2020 (08:38)
China’s local PE market has recently snapped a 9-week rally due to falling Dalian futures and fading buying appetite. Slightly lower local prices have weighed on the import sentiment, with buyers adopting a more cautious approach to fresh purchases.

In Southeast Asia, meanwhile, the PE uptrend has lost momentum as players’ eyes have been locked on the softening signals from China.

China’s PE demand falters even for HDPE pipe

PE demand from China had been buoyant particularly for the HDPE pipe grade since the country came out of its COVID-19 related lockdowns and downstream activity picked up. In May, the country’s overall PE imports hit a record high, reflecting the strength of demand.

In the import PE market, strong demand combined with limited supplies supported an upward trend for nine consecutive weeks starting from mid-May.

This week, however, traders have been reporting that buying interest has started to fade as buyers retreated to the sidelines after seeing local prices losing ground. Expectations that the supply tightness will soon ease have added to the decreasing appetite for fresh purchases.

“Demand for HDPE pipe was firmer than other PE products during the uptrend amid increased activity in the infrastructure and construction sectors in the post-lockdown period. However, buying interest has weakened even for the pipe grade recently,” noted a few traders.

Import prices fail to extend hikes to 10th week, outlook softens

Import PE prices on CIF China basis have failed to maintain their firming trend so far after nine straight weeks of gains. Spot offers for Middle Eastern origins were assessed stable from last week, while prices for Indian PE edged lower.

Tightness expected to ease

The turnaround season in China is approaching an end as several PE plants are slated to be restarted after maintenance shutdowns in July and August.

Apart from the plant restarts, players also believe that the upcoming new capacities in the country will help ease the current tightness of supplies. In 2020, approximately 3.5 million tons of PE capacity are expected to be added to the country’s overall production.

According to traders, the two major domestic producers’ overall polyolefin supplies were reported at 715.000 tons on July 23. In early July, their inventory levels were hovering below 700.000 tons.

Meanwhile, some players noted that the arrival of US PE cargoes at Chinese ports will also be felt in the import market in the near term.

Ghost Month to limit activity

Trading activities are expected to decline in around mid-August due to the upcoming Ghost Month, some players commented.

SE Asian buyers already resisting continual hikes

Import PE prices on CIF SEA basis have increased for the 12th consecutive week, but the pace of gains has slowed this week amid the upcoming Eid al-Adha holidays and the softening signals from China.

Despite the fact that turnarounds continue to keep regional PE supply levels low, import prices could only witness slight gains of around $10-20/ton when compared to last week.

“Buying resistance has increased from converters who cite lower end product prices which could not support higher polymer prices. Regional buyers may just have to cut their purchasing volumes given the continual PE hikes. Demand is starting to soften particularly in Vietnam,” players said.

The softening in China’s local PE market may limit further upside in Southeast Asia, as regional buyers grew more cautious about fresh purchases. The upcoming holidays may also impact trading volumes, with some market players taking an extended break to celebrate the Eid holidays next week in countries such as Indonesia, Malaysia, and Singapore.
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