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Year-end stock clearing adds to bearish PE trend in SE Asia

by Abdul Hadhi - ahadhi@chemorbis.com
by Merve Sezgün - msezgun@chemorbis.com
  • 01/11/2019 (04:16)
Southeast Asia’s import PE markets, especially HDPE and LLDPE film, have been largely declining since witnessing a short-lived rebound in September in the face of lukewarm demand and ample supplies.

Recently, regional traders have started offering further discounts to clear inventory before the year ends, particularly for deep-sea US cargoes.

“This is the year-end clearing period and so, sellers are clearing deep-sea cargoes at even lower prices. Buyers can afford to wait and see in hopes of securing cheaper cargoes out into the second half of November and December,” a trader explained.

US HDPE, LLDPE drop 7-8% on month

Data from ChemOrbis Price Index suggest that the weekly average of import HDPE film prices for overall origins has slipped around 6.5% over the month to $870/ton while US origin material has declined almost 8% to $825/ton – both on CIF SEA basis.

Meanwhile, the weekly average of import LLDPE film for overall origins fell 4% to $850/ton while US origin product dipped around 7% to $825/ton on similar terms over the same period.

“Lower HDPE and LLDPE film offers for US origins are exerting extra pressure on overall import prices,” a few players noted.

Sources at two US producers also confirmed the trend, with one even saying “Deep-sea US Gulf cargoes are on fire sale close to year end, and have driven offers even lower.”

Rising availability of multiple origins

While US material is being offered with sharp discounts as traders try to reduce inventory, other factors are also at play to keep up the pressure on PE prices.

Middle Eastern material has re-emerged from mid-October to add to cargoes available from Thailand, Taiwan, and South Korea in addition to US deep-sea cargoes. Cost support for PE has also been declining as prices of feedstock ethylene have notably retreated.

Less pressure on LDPE

The pressure is less on LDPE film as the bulk still goes to China with tariffs on that PE grade yet to go into effect but the impact on HDPE and LLDPE has been noticeable.

On a month over month comparison, the weekly average of LDPE film prices for overall origins has not posted any notable changes, only a drop of 1%, to around $930/ton CIF SEA. As for US LDPE film, the weekly average of prices are largely stable from last month at $875/ton on similar terms.

The trade war between the US and China and ensuing tariffs have blocked increasing US PE supply from the Chinese market, especially HDPE and LLDPE, prompting sellers to divert them to other markets such as Southeast Asia.
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