Peak season closes with modest PP, PE gains in China, except for LDPE’s strong stand

The PP and PE markets in China slipped into November with a stable-to-softer tone, wrapping up the peak “Golden September – Silver October” season. Yet, golden opportunities for polyolefin sellers to boost margins proved elusive, as price hikes came in fits and starts. While PE—particularly LDPE film—managed a steady climb, PP struggled to gain traction from the very start, finding little solid ground to stand on amid shifting market dynamics.

PE outshines PP during this high season

During the peak season, PE grades outperformed PP in both import and local markets. According to ChemOrbis data, local and imported PE grades saw prices rise by around 1-4% over the past two months, with LDPE film leading the upturn. Meanwhile, import homo-PP raffia and inj. prices edged up by only half a percent, and even faced a loss of more than 1% domestically over the same period, hitting a three-month low.

The supply-demand balance tilted in PE’s favor, with PP facing more pronounced supply pressure due to ample domestic production and increased supply from the Middle East since September.

Regarding demand, while buying interest in PP was said to arise from the automotive industry, players reported a revival in PE demand from several downstream sectors, including agriculture, retail, cosmetics, and pharmaceuticals. Besides, the Mid-Autumn Festival in mid-September and Golden Week holiday in early October led to improved demand for food packaging, providing some benefits to PE.

LDPE sustains steady upward direction

LDPE film persistently stayed on its stable-to-higher trajectory since a shortage of supply, combined with seasonal demand, refrained sellers from issuing any price cuts during the high season. Import LDPE film prices fully recovered from losses seen between mid-July and mid-August, with ChemOrbis Price Index data showing their weekly average price reaching a high not seen since early July by the week ending November 1. The local LDPE market reflected a similar strength, with the price surpassing its around two-year high recorded in the beginning of July.

The strength of LDPE film was also reflected through a major Saudi Arabian producer’s monthly pricing. September LDPE offers from the producer remained stable from August, whereas offers for October and November shipments witnessed hikes of $20/ton and $30/ton, respectively, when compared to a month earlier.

As for HDPE and LLDPE film, after returning from the Golden Week holiday with fresh increases, import markets stabilized, whereas locals experienced several rounds of downward adjustments. In USD terms, the local price trend even looked weaker due to the ongoing depreciation of the yuan against the US dollar, hindering a full recovery from earlier losses in July and August.

Weak sentiment prevails, threatening LD’s uptrend

Despite some improvements, this year’s seasonal demand for polyolefin was deemed lower-than-expected, with offtake volumes being tied to basic needs. Limited demand and a supply overhang due to abundant inventories and rising imports ahead of the year-end served as underlying factors behind the post-holiday weakness, alongside a spillover impact from bearish futures and energy markets.

“Supply is expected to increase in November with the arrival of imported shipments, especially from the US, along with new plant startups. Demand is likely to remain cautious, with buyers purchasing only as needed. The only positive factors are macroeconomic support from the Chinese government and higher freight rates,” commented the major Saudi Arabian producer’s agent.

Unfavorable supply-demand dynamics might dampen the trading atmosphere further and pose challenges for the ongoing uptrend of LDPE, with some players already expecting a price reversal. A trader noted, “An oversupply situation persists, except for LDPE. Overall demand is sluggish due to low end-user orders at downstream factories. Therefore, we expect prices to stabilize at best, or even recede, especially for LDPE due to its current high levels.”