Strong post-holiday start pushes China’s PE prices to more than 2-month highs

China’s PE markets saw a robust start post-holiday, driven by rising futures, higher production costs, and improving demand. The ChemOrbis Price Index indicates that the weekly average prices of key film grades hit more than two-month highs, with the local midpoint for LDPE film, in USD terms, reaching its highest level since early August 2022.

LDPE still outperforms other film grades

Over the week ending on October 11, import LDPE film prices for all origins were assessed $10-30/ton higher from the pre-holiday week at $1120-1230/ton on a CIF China, cash basis. Local prices were assessed CNY145-450/ton ($20-64/ton) higher at CNY9665-10900/ton ($1211-1365/ton without VAT) on an ex-warehouse China, cash including VAT basis.

In the meantime, HDPE and LLDPE film saw rollovers to marginal increases of $10/ton for imports, while their local prices were stable to CNY180-250/ton ($25-35/ton) higher when compared to the pre-holiday week.

Since the seasonal uptrend began in mid-August, import and local prices for LDPE film have risen by about 7%, while HDPE and LLDPE film prices have gained around 2-3%, according to ChemOrbis data.

High futures, costs fuel increases

The primary drivers of the price hikes were the upswings in futures markets and higher feedstock costs, according to market sources. A producer commented, “The sharp rise in crude oil is pushing upstream costs higher, leading to increased offers for downstream PE grades.”

Crude oil strength, alongside Beijing’s economic stimuli, also boosted futures prices. January LLDPE futures on the Dalian Commodity Exchange rose by CNY94/ton ($13/ton) from the pre-holiday session as of October 10.

While upstream feedstocks like oil and naphtha saw upward trends, ethylene prices rebounded after a four-week decline, offering further cost support to PE producers. ChemOrbis Price Wizard shows that spot ethylene prices rose by $20/ton to $840/ton CFR China as of October 10.

However, volatility in crude oil prices throughout the week tempered market confidence and led to a decline in LLDPE futures on the Dalian Exchange, pressuring PE sellers to soften their pricing stance. “Recent drops in oil prices have put bearish pressure on the market, leading to a pullback in PE prices,” said a Xiamen-based trader.

Seasonal demand gradually grows

Adding to the impact of rising costs and futures was the steady improvement in demand, as buyers returned from the holiday with renewed interest amid the ongoing peak season and an optimistic economic outlook.

More buyers entered the markets to restock materials, and the number of concluded deals increased. Another trader commented, “The downstream sectors remains in their traditional peak season. This, accompanied by multiple macroeconomic policies, leads to a gradually increasing demand.”

A local producer’s source opined, “Buyers are willing to inquire about offers and are displaying higher buying enthusiasm thanks to an optimistic outlook for China’s economic growth. However, they remain focused on essential purchases.”

Improving demand also contributed to the destocking of domestic inventories, which significantly accumulated by 270,000 tons during the week-long holiday. According to market sources, China’s two major producers reduced their combined polyolefin stocks by 45,000 tons to 885,000 tons in the first few days following the holiday.