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LDPE faces a tougher slog in Asia, Europe still on a tear

by Pınar Polat -
by Manolya Tufan -
  • 02/06/2021 (10:15)
The European LDPE film market has seen no respite from its bullish run for the past seven months on the heels of tight availability. On the contrary, LDPE film prices in Asia have

been on a demand-driven downturn since mid-March, when the markets started to retreat from the highest levels in the last seven years.

LDPE sees sharper losses than HD, LLDPE in China

In China, LDPE film prices have witnessed relatively steeper declines than HDPE and LLDPE film during an almost three-month downtrend.

As can be seen in the below graph created by ChemOrbis Price Wizard, the weekly average of Middle East origin LDPE film prices on CIF China basis have lost 24% within this period while HDPE and LLDPE film prices have retreated by 12% and 14%, respectively.

PE Prices –Import – China

After LDPE film prices below $1300/ton CIF threshold appeared last week, prices have fallen further and neared the $1200/ton CIF threshold recently.

Middle East origin LDPE film prices in China are now reported at $1210-1240/ton CIF China, cash, down by $60/ton from last week.

SEA LDPE market similar to China

A similar scenario has been in place in the Southeast Asia LDPE market. Just like in China, PE prices have been on a downward trend since mid-March, with LDPE film facing the largest pressure.

A Middle-Eastern producer’s June LDPE film offers are down by $150/ton from early May levels to stand at $1420/ton CIF SEA, cash basis. “Demand in Southeast Asia countries is quite weak nowadays as several countries are under Covid-related lockdowns. Therefore, PE prices are under downward pressure, particularly LDPE film,” a source from the producer noted.

Europe-China gap at record high

After reversing the course by November 2020 amid production hiccups, LDPE prices have steadily risen in Europe. Increases gained steam as of December 2020 as supplies dried up to a large extent owing to strong export activities to the higher-netback regions. Likewise, limited imports made their way to Europe due to the poor netbacks at the time.

Supplies for this grade also remained more elusive across the board due to regional producers’ reduced allocations on the back of force majeures and strong demand for certain applications.

LDPE prices have posted monthly increases of up to 3-digits since late last year to hit an all-time high by March 2021. Sharp hikes rendered the European market as a favorable outlet to divert import cargoes, while logistics issues amid container shortage prevented exporters from taking advantage of the arbitrage.

LDPE prices regained their premium over other global markets as of early 2021. Although European markets should carry a premium over other markets under balanced conditions, LDPE prices were trading at par or below the import markets of China, Southeast Asia, Turkey and Egypt during Q4 2020.

According to the weekly average data on ChemOrbis Price Index, the gap between China and Europe has hit an all-time high at $1460/ton, marking the widest gap between the two countries since ChemOrbis started to collect data in 2008. The gap between the two countries has widened to a great extent as these markets have been following opposite directions in the past months.

LDPE - FD NWE –Import – China

There remains uncertainty as to whether or not LDPE prices on FD NWE basis will absorb another round of increases in June as initial offers already indicated some increases. With LDPE being the tightest grade amid a slew of force majeures and the lack of sufficient imports, this grade may retain its massive premium over other markets in the near-term.
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