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Major LDPE markets touch multi-year highs on growing tightness

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 11/09/2020 (09:20)
Most PE markets opened September on a strong note since supply-demand fundamentals dominated the pricing trend in major outlets including China, Turkey and Southeast Asia. Growing tightness for LDPE sparked more rapid hikes for this product across the board.

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LDPE offers to China soared nearly $100 since mid-Aug

China’s import PE markets have been on an increasing trend since H1 August amid delivery issues from Iran and satisfactory demand on the appreciation of CNY/USD parity. Prices retained their uptrend as the new month started while storm-hit production in the US reinforced supply woes.

Short supplies have apparently affected LDPE more than other PE grades considering the fact that there are less LDPE capacities across the world with respect to HDPE and LLDPE.

Import LLDPE c4 film and HDPE film prices were assessed $10-40/ton above last week versus $60/ton hikes for LDPE film, all on CFR China basis. The market was indifferent to recently lower oil prices and Dalian Commodity Exchange (DCE) as tightness and healthy demand for imports far outweighed.

According to ChemOrbis data, LDPE prices surged $93/ton (9.8%) just in a month on a weekly average, versus $50/ton gains (5-6%) for LLDPE c4 film and HDPE film. LDPE film has now reached its highest level since October 2018 following the latest series of hikes.

Premium of LDPE over HDPE widens in China, Turkey

The weekly average data from ChemOrbis also revealed that the delta between import LDPE and HDPE film widened both in China and Turkey this week. Accordingly, the premium of LDPE film over the latter one hit its highest level ($155/ton) since February 2017 in China. The gap stands at a 7-month high of $80/ton in Turkey when compared to $48/ton in early August.

Petkim issued two LDPE hikes, upward pressure on imports mounted in Turkey

In August, Middle Eastern sellers failed to achieve their hike targets due to muted buying appetite amid the depreciation of Turkish Lira against foreign currencies. Especially LLDPE prices were trimmed in response to rising prompt supplies.

However, the sentiment reversed course in early September as suppliers renewed confidence amid a firmer trend in China. The country attracted suppliers amid generous margins and yuan-driven appetite for imports which led to reduced allocations to the low Turkish PE market.

Import LDPE prices to Turkey gained 4% ($40/ton) from two weeks ago, while LLDPE and HDPE moved up roughly by 2-3% ($15-25/ton) in the period, as ChemOrbis data put it. Currently, LDPE film prices are standing at their highest level since May 2019.

Still, the upward pressure on the market remains in place since Turkey trades $56/ton below China.

Most Turkish players concurred, “LDPE will see four-digit prices soon in Turkey based on theoretical calculations.”

Turkey’s domestic producer Petkim applied two LDPE hikes in a row this week, with the supplier’s total hike reaching $40/ton. Following suit, the distribution market climbed $50/ton on both ends week over week.

Rising China, supply constraints influenced SEA

PE prices have defied lower oil futures and buyers’ resistance in Southeast Asia. The ongoing uptrend has been mainly influenced by buoyant demand and higher netbacks in China, supportive ethylene prices near $750/ton CFR SEA and scarcity of LDPE offers.

In Southeast Asia, the weekly average of import LDPE film prices is standing at 15-month high nowadays following up to $40/ton hikes on the week.

Spot ethylene was unfazed by weaker energy complex

Crude oil benchmarks have given some losses since surging of COVID-19 cases in several parts of the world weighed on oil demand outlook. Higher inventories and the end of driving season in the US coupled with woes over a tension with China added to the scene.

Nonetheless, olefin prices have not responded to lower oil and naphtha prices so far with spot ethylene on a CFR China basis staying at a 6-week high, according to ChemOrbis data.
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