China emerges as shock absorber after polymer rally pushes SE Asian markets to multi-year highs

The outbreak of the Middle East war triggered a powerful rally across Southeast Asia’s polymer markets, with prices surging by 40-60% in a matter of weeks and reaching multi-year highs. However, unlike a purely supply-driven spike, the uptrend has increasingly run into structural limits, as widening price gaps with China curbed further upside and, in some cases, triggered corrections.

Based on ChemOrbis Price Index data, most polymers posted steep gains from week 9 (pre-war) to their respective peaks between weeks 13 and 16. Yet, as the rally matured, demand resistance and competitive Asian supply, particularly from China, began to reshape the trajectory of the market.

Polyolefins spearhead rally, China arbitrage widens sharply

Polyolefins led the surge between Week 9 (pre-war) and Week 16, posting the most pronounced increases across the polymer chain. PPBC injection and homo-PP raffia/injection jumped by 58% and 60%, respectively, both reaching four-year highs on a CIF Southeast Asia, cash basis.

PE markets followed a similar trajectory. LDPE film surged 58% to a four-year high, while HDPE film climbed 59% and LLDPE film 55%, both hitting their highest levels since November 2014. Notably, LLDPE prices corrected from these peaks last week, resulting in a relatively smaller net gain over the period.

The rally was underpinned by disruptions to Middle Eastern supply, particularly for PE, where the region relies heavily on Saudi Arabia and the UAE. Logistical constraints and rising transportation costs further inflated offers, with producers resorting to alternative shipping routes to bypass bottlenecks.

As prices surged, the spread between China and Southeast Asia widened dramatically. PP differentials expanded from $20-40/ton pre-war to $150-190/ton, while PE spreads ballooned from around $15-20/ton to nearly $300/ton. This gap opened a strong arbitrage window, encouraging Chinese cargoes to flow into the region.

Indeed, Chinese offers—particularly for PP and LLDPE—dropped sharply last week, pressuring the lower end of the ranges. Although these levels attracted some buying interest, demand remained weak overall. Converters continued to resist high prices, opting for hand-to-mouth purchasing strategies amid margin pressure and ongoing uncertainty.

PVC breaks away from rally as China floods market

PVC followed a markedly different path. Prices surged by 51% between Week 9 and Week 13, reaching their highest levels since mid-2022. However, the rally quickly reversed.

From Week 14 onwards, the market entered a steady downtrend, with prices falling by a cumulative 20% through Week 16. The correction was largely driven by aggressive Chinese supply, which dominated the import market with increasingly competitive offers.

China accounts for around 45% of Southeast Asia’s PVC imports, allowing buyers to pivot quickly toward lower-priced material. Chinese acetylene-based offers fell below $800/ton CIF, with deals reported as low as $790/ton, forcing other suppliers to adjust downward.

Despite sizable hike announcements from Taiwan, market participants widely viewed these levels as unworkable, given that most transactions were already taking place below $1000/ton. The disconnect between offers and tradable levels further reinforced the bearish sentiment.

PET rally peaks, then reverses on demand fatigue

PET bottle markets also witnessed a sharp rise followed by a correction. Prices increased by 40% from Week 9 to Week 15, reaching their highest levels since mid-2022 before easing in Week 16.

While tight supply and elevated upstream costs initially supported the rally, weakening demand and falling crude oil prices prompted buyers to retreat. Chinese supply, which dominates regional imports, continued to anchor the market and accelerate the downward shift as sellers trimmed offers.

Buying activity slowed noticeably, with many players delaying purchases in anticipation of further declines and potential geopolitical easing.

Styrenics lose momentum after multi-year highs

Styrenics echoed the broader trend of sharp gains followed by corrections. Between Week 9 and Week 15, GPPS injection and ABS injection prices rose by 50% and 58%, respectively, both reaching four-year highs. HIPS injection climbed 50% to its highest level since July 2021.

The rally was fueled by elevated styrene costs and supply constraints, including force majeure situations among key producers. However, the uptrend proved short-lived.

Last week, prices for both PS and ABS declined as upstream costs softened and demand remained weak. Buyers resisted higher offers, while Chinese material exerted increasing pressure on the lower end. Trading activity stayed limited, with most participants sticking to need-based purchasing.