US PE yields to lower bids, offers touch new lows in global markets

Most PE markets retained their bearish rally throughout April. This was not only in response to virus-hit demand in major markets including Southeast Asia, Europe, Turkey, the US and Africa but also to extraordinarily volatile energy complex and derivative feedstock markets.

China, meanwhile, enjoyed a rebound in the first half of April thanks to rising demand amid resuming activity after a 2-month lockdown before prices saw downward corrections. PE prices in the country closed April on a firm path owing to lower domestic inventories amid turnarounds and gains on the Dalian Exchange Commodity.

CIF SEA/Turkey offers slumped by up to $160/ton since March

According to ChemOrbis Product Snapshot below, US PE offers in Southeast Asia and Turkey plunged by up to about 20% ($160/ton) on the low end depending on the grade during the March-April period.

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Offers sank to below $700/ton CFR Turkey/SEA for LLDPE and HDPE film in late April. The destructive impact of COVID-19 and historic low crude prices hampered buying appetite, particularly for deep-sea cargos in both markets.

“We were offered attractive US prices at $680-690/ton for end May/June shipment cargos. Although they are tempting, the gradual reopening of European export markets and economic challenges keep most buyers cautious,” a Turkish converter said.

Meanwhile, players both in Southeast Asia and Turkey were looking to China for signals regarding the near-term trend. The world’s second largest economy will return from an extended Labor Day holiday this week.

LDPE film broke below $800/ton, LLDPE hit $690/ton in Egypt

Activity was muted in Egypt amid the virus-driven curfews that have taken place starting from March 25, while the Muslim fasting month of Ramadan added to the hesitant buying appetite.

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In response to limited interest from Egyptian buyers, American LDPE and LLDPE film broke below $800/ton and $700/ton CIF Egypt, respectively in the last week of April. A buyer noted, “We received US LDPE offers as low as $770-780/ton.”

Similarly, American LLDPE and HDPE film prices broke below $800/ton in South Africa in H2 April, while they stood $70-80/ton below Saudi Arabian offers.

Competitive import US HDPE inj. and LLDPE found way to Italy

Players in Italy reported attractive American offers for HDPE injection, LLDPE c4 film, mLLDPE C6, MDPE film grades. These DDP-based import offers stood €50-60/ton below the low ends of the overall spot markets.

An agent of a US producer commented, “LDPE may face smaller erosion than other PE grades amid relatively limited import supply.”

The European PE markets are bracing for a new series of drops in May based on lower ethylene contracts. Yet, producers aim to keep the downtrend in check similar to the case in April, since prices already stand at multi-year lows. “€50/ton declines are predicted this month while we hope that end demand improves amid the gradual reopening of economies in the region,” a buyer noted.

PE offers from the US weigh on Middle East producers for May

According to a common opinion, US producers tried to offset their unfavorable delivery terms by providing competitive prices.

“Shipping of the US materials takes up to a month, so we are waiting for more Middle Eastern suppliers to reveal their prices,” a trader in Egypt commented. A Saudi Arabian major initially issued rollovers to the import market, but met resistance.

Middle Eastern LDPE offers will have to come below $800/ton under these circumstances, according to Egyptian buyers. The pressure is felt in the Middle East itself considering the fact that US PE was last traded $40-60/ton below Saudi cargos in Lebanon.

Some Middle Eastern producers have already voiced lower sell ideas to Turkey for May last week. Buyers expect to receive around $50/ton lower offers from their regular suppliers, initially. “Regional suppliers will be under a pressure of attractive American prices,” traders similarly opined.

Yet, the longer run is under discussion as some players cautiously think that May might be the last month of price cuts. “This will depend whether China will retain its firming following Labor Day holiday and crude oil prices will extend their gains to May amid the starting output cuts or not,” a player highlighted.