SE Asia’s import PE markets fluctuate amid opposing factors

In Southeast Asia’s import PE markets, the upward trajectory, which began in mid-December, has started to falter since early March, resulting in mixed price movements this month. Price volatility has been driven by conflicting factors, such as rising production costs and persistently subdued demand.

April shipments from ME revealed with decreases

During the week ended on March 22, prices for certain film grades firmed up as sellers regained confidence, buoyed by the surge in crude oil prices and the elevated costs of feedstock and freight. Moreover, diminished supplies from the Middle East due to several maintenance shutdowns further bolstered sellers’ quest for fresh price hikes.

However, sentiment has once again waned since last week, as sellers’ higher offers have encountered stout resistance from regional converters who are already grappling with the challenge of passing on escalating costs to their end-product prices.

Consequently, Middle Eastern producers have approached the regional markets with decreases in their April shipment offers, citing the insufficient demand recovery in key downstream industries.

Traders in Vietnam reported that a major Saudi producer cut its April shipment PE offers compared to March, with reductions of $20/ton for LDPE, $40/ton for LLDPE, and $50-60/ton for HDPE. They also noted that the producer was open to an additional $20/ton discount in deals for all PE grades due to poor demand and the anticipation of further price declines. Another Saudi producer also reduced its April shipment offers to Vietnam by $10/ton amidst weak buying sentiment.

Players: There could be more price volatility going forward

Although PE suppliers tried to maintain import prices at high levels during March, the persistent weakness in demand continued to hit sentiment.

A source from a South Korean producer commented, “We have maintained our offers across all PE grades, as strong oil and feedstock costs are putting a floor under prices. If energy fundamentals sustain the current upward trajectory, it will be difficult for PE prices to correct by much. However, there will be more price volatility going forward as demand destruction may force producers to cut offers.”

“We’ve tried to keep our offers stable, as we’re aware of challenges faced by converters in passing higher costs to downstream buyers. Downstream operations are at lower levels due to weak demand and poor finished product prices. At the same time, producers face escalating production and ocean freight costs, and have little choice but to try to pass on rising costs,” a Singapore-based trader said.

Another Singapore-based trader also pointed to the stalled buying activity and commented, “Converters have been strongly resisting recent weeks of price hikes, with producers attributing the increases to elevated production costs and rising ocean freight expenses. Nonetheless, producers are also grappling with increasing inventory pressures. As a result, it’s likely that there will be additional production cuts before further price adjustments entice converters to resume purchasing their typical volumes.”