PE demand falters amid softer futures, upcoming holiday in China

Players operating in China’s PE market report that demand has faltered this week despite the limited number of import offers, the ongoing bullishness of ethylene and the peak season.

Sellers opined, “Converters are limiting their purchases to their immediate needs nowadays given the recent softening in futures.” The National Day holiday, which will take place for one week in early October, is also seen as a factor that slows the market down.

A trader based in Xiamen noted, “LLDPE futures have been decreasing since September 6, which is pushing buyers to the sidelines. We heard that overall inventories of CNPC and Sinopec have increased to 800,000 tons, the highest level since June. Demand failed to catch up with the rapid increases in PE prices; hence the market might see some downward corrections ahead of the National Day holiday.”

LLDPE futures on the Dalian Commodity Exchange were down by CNY385/ton ($59/ton) on a week over week basis on September 19. Futures recorded a larger decrease of CNY505/ton ($77/ton) when compared to September 1.

A Shanghai-based trader commented, “We are not interested in making fresh purchases from the import market as end-users are not even accepting our current offer levels. The tightness in import PE supplies is likely to remain in place until mid-October, yet we are feeling uncertain as to whether it can be enough to push prices higher in the midst of lower futures and buyers’ resistance ahead of the National Day holiday. Local PE prices are CNY100-200/ton ($15-30/ton) lower than last week.”

Meanwhile, apart from the step-back in the local market, the import market is also facing pressure. A trader cut its LLDPE film offer for a Saudi origin by $30/ton from last week to $1220/ton CIF, cash. “We are waiting to see buyers’ response to our new offer level now,” he said.

According to some players, demand might be back after the National Day holiday as it will still be the high season and import supplies are likely to remain limited in the midst of several maintenance shutdowns in October.

In the upstream markets, spot ethylene prices in Asia climbed further by $15/ton on a weekly basis to be currently reported at $1320/ton CFR China, the highest level since late February.