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PE markets remain bearish, but are competitive offers from US fading?

by Merve Sezgün - msezgun@chemorbis.com
by Esra Ersöz - eersoz@chemorbis.com
  • 12/08/2022 (02:31)
Import PE prices across major markets have been tracking a downward trajectory since around mid-April in the face of weaker global demand and comfortable supplies. Although bearish sentiment still persists amid economic headwinds, players in some export destinations report that competitive US offers have mostly disappeared this week.

Export offers from the US have been falling in line with the global trend. As per ChemOrbis Daily Prices, US PE offers showed up at very aggressive levels last week in Turkey and Malaysia, staying well below the prevailing market levels. .

US LLDPE offered below $1000 CIF Malaysia last week

A few buyers in Malaysia reported last week that they were offered US origin LLDPE film at $980/ton CIF, cash. “This has been the lowest price in the market so far. But the seller warned us that the offer was only valid for a week,” one of them explained.

Last week, the next lowest LLDPE film price was for a Middle Eastern origin at $1020/ton CIF, meanwhile. The price range for all origins was assessed at $1020-1150/ton CIF, cash.

Despite the withdrawal of aggressive US offers, import PE prices for other origins have continued to fall in Southeast Asia. This week’s overall price assessment for LLDPE film stands at $1000-1120/ton CIF, with the low end represented by Middle Eastern origins.

An agent of a Mid-Eastern producer commented, “Prices keep falling as buying sentiment remains bearish. Most converters have high inventories at a time they face a slump in export orders for their finished products. The uncertain economic outlook is likely to dampen demand further.”

US LDPE offer to Turkey at $1200/ton withdrawn this week

Players reported US LDPE offers last week in Turkey at $1200/ton CIF, standing $80/ton below the lowest Mid-East offer reported, according to ChemOrbis Daily Prices. However, this offer was withdrawn this week. “If it had stayed, Mid-Eastern offers would have to come further down today,” commented a buyer.

Back in early August, Turkey’s import PE markets also saw aggressive European offers fade, as they must have freed their stock pressure right before the regional summer holidays. On top of this, the fact that aggressive US offers proved short-lived has triggered the question of whether PE markets are nearing the bottom.

In the wake of the persistently weak demand and current economic concerns, sentiment remains bearish across Turkey’s PE markets. China based netback calculations also suggest room for further price erosion in Turkey, unless China shows a steady rebound. Nevertheless, the expectations for a nearing bottom - particularly in September - are also justified given the pressure from high costs and eased stocks.

US offers continue to form low ends in China

Unlike other regions, China has seen such low US offers this week. The low ends of CIF LDPE and HDPE film ranges are hosting competitively-priced US origins.

A trader based in Zhejiang reported that an LDPE film deal was closed this week at $1100/ton CIF for a US origin. The next lowest offer level in the market was reported at $1130/ton for Indian origins. Middle Eastern LDPE film, meanwhile, was offered in the range of $1150-1180/ton CIF, cash.

As for HDPE film, US offers have formed the low end of the overall price range at $950-1020/ton CIF China.

Whether these aggressive offers from the US will stay next week or not is yet to be watched. Demand is a real concern in China, keeping the PE outlook bearish. However, olefin and polyolefin producers have been cutting production rates across Asia in an attempt to counterbalance this demand slump. Therefore, any possible improvement in demand or an increase in upstream costs may help spur a recovery in prices, as well, although its sustainability is debatable.

US to ramp up exports in Q4

The US is a net exporter of PE, one of the largest suppliers of the world, competing fiercely with Saudi Arabia upon the addition of new capacities after 2018. In 2020, the US exported a record of more than 10 million metric tons of PE and became the top global supplier, while it only slightly fell behind Saudi Arabia in 2019 and 2021.

As for the first half of this year, statistics suggest an annual increase of 16% in US PE exports, far outpacing Saudi Arabia. ChemOrbis Stats Wizard also reveals a notable climb for LDPE imports of Turkey and China in H1, although HDPE and LLDPE imports shrank in the same period year-over-year.

Unless the US production is hit by another hurricane season like in the past few years, more US cargoes are expected to find their way to export markets in Europe and Asia, right after North and South America.
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