China’s PE prices reach new lows; demand stalls, tariff worries mount

PE prices in China continued their decline over the past few weeks, reflecting deteriorating sentiment across the board. Key factors contributing to the bearish tone were weak supply-demand dynamics and downward revisions in April shipment offers by a major Saudi Arabian producer. As a result, both import and domestic prices dropped to their lowest levels in months, with HDPE in particular touching multi-year lows.

Saudi major issues visible cuts for April

The Saudi Arabian producer’s offers for April shipments witnessed notable decreases when compared to March, immediately dimming market confidence. LDPE indicated a $20/ton decline, while LLDPE and HDPE offers saw larger drops of $30/ton and $40/ton, respectively.

An agent of the producer attributed the reductions to weaker cost support following a sharp drop in crude oil futures and a softer demand outlook. She said, “Demand from the packaging and household plastic industries remains weak, despite the peak season for agricultural film production in the Northern region. Compared to the same period last year, overall demand is lower, adding to market uncertainty. As a result, we have lowered our offers despite tightening import supply due to scheduled maintenance by other producers,” added the agent.

Import HD hits nearly 5-year low, LD at 7-month lows

According to data from ChemOrbis Price Index, import prices for HDPE film dropped by roughly 5% over the past three weeks, hitting their lowest point since mid-July 2020. This further reinforced its weakest performance among the three main film grades.

LDPE film prices slipped to their more than seven-month lows after posting renewed $20-40/ton decreases, whereas LLDPE imports were largely unchanged as of the week ending on April 4. Consequently, the spread between LDPE and LLDPE film narrowed to $160/ton, marking the tightest gap since the second half of August 2024.

Apart from demand stagnation and lower April offers from the major Saudi Arabian producer, the soft footing inside China exerted additional pressure on imports, with a trader saying, “Market activity remains limited, with a lack of new offers. Some exporters have reportedly cut back on shipments to China, as domestic prices are relatively low.”

Local prices on 4-week decline

In the domestic market, a stable-to-softer trend has been observed over the past month, as local producers have been struggling to maintain firm pricing due to sluggish downstream demand and supply glut. The previous week recorded declines ranging from CNY50-100/ton ($7-14/ton). In particular, HDPE film prices fell to levels not seen since mid-January 2021. Local prices for LLDPE film dropped to their lowest since mid-December 2023, while LDPE film reached more than six-month lows.

Trade tensions cloud outlook

The outlook remains bleak amid a lack of demand recovery in packaging and film sectors. On top of that, recent US tariff hikes, the steepest in over a century, have sparked caution. Effective April 2, the US imposed a blanket 10% tariff on all exporters, raising total tariffs on affected Chinese goods to 54%.

Although the new tariffs currently exclude certain polymers like PE, the move has already dented market sentiment. A trader in Xiamen noted, “Few buyers are actively inquiring. The market is plagued by weak downstream demand and uncertainty over US customs policy.”

China retaliated on April 4 by announcing a 34% tariff on all imports from the US, effective April 10. This tit-for-tat escalation has further darkened the trade outlook and could limit appetite for raw materials.

Oversupply concerns to intensify

Adding to the bearish outlook is China’s upcoming wave of capacity expansions. The country is expected to bring an additional 1.7 million tons/year of new PE capacity online by the end of April. This will mark the beginning of a major second-quarter expansion plan that could further overwhelm an already oversupplied market, putting further downward pressure on PE prices in the short term.

The lack of meaningful consumption has led to slow inventory depletion, keeping overall supply at elevated levels despite reduced import supply. According to market resources, the combined polyolefin inventories of China’s two major polyolefin producers built up by 45,000 tons week-on-week to be reported at 755,000 tons as of April 3.