LDPE leads China’s PE rally on tightening supply, but demand still wobbly

China’s PE market extended its gains this week, with LDPE film prices taking the lead amid signs of tightening availability and improved market sentiment. The upward momentum was primarily driven by a sharp rebound in crude oil, stronger futures performance, and lingering concerns over Middle Eastern geopolitical risks.

LDPE film offers from the Middle East jumped by $20-30/ton to $1000-1040/ton CIF China, marking the most notable movement among the three film grades. LLDPE and HDPE film prices also edged, although gains remained limited by ongoing buyer caution.

Cost rally lifts market, but demand lagging

A combination of rising Brent crude oil prices, which surged 10% week-on-week to above $75/bbl, and spot ethylene values nearing two-month highs, injected bullishness into the market. Futures activity also lent support, with Dalian Commodity Exchange’s September LLDPE contract posting a weekly gain of CNY319/ton ($44/ton) on June 19.

However, these cost-side gains haven’t been matched by a solid pickup in downstream consumption. A trader noted, “We are sold out now, but this is more about short-term sentiment than real demand growth.” While inquiries have picked up compared to May, broad-based demand remains weak, a reflection of the current off-season and broader macroeconomic uncertainties.

Local market sees second week of gains

In the domestic market, LDPE continued to lead the rally, rising CNY210-600/ton ($29-83/ton) week-on-week on the back of reduced supply and stronger buying interest. Prices for LLDPE and HDPE also firmed by CNY90-100/ton and CNY50-100/ton, respectively.

Market sources cited tighter LDPE availability, especially for spot cargoes, compared to HDPE and LLDPE. A converter explained, “LDPE rose more because supply is relatively short compared to HD and LL.” Meanwhile, oversupply continued to weigh on the other grades, capping their upside.

Inventories down, confidence up but caution persists

The bullish sentiment was reinforced by a notable inventory draw. The two major domestic producers’ combined polyolefin stocks dropped by 60,000 tons from the previous week to reach 760,000 tons as of June 19. This 7% weekly decline signaled healthier offtake and better market balance, albeit not yet driven by end-user demand.

Improved order volumes and recent China-US trade talks have also helped boost confidence, according to players. Still, most buyers continued to purchase only to cover immediate needs, wary of the uncertain global environment. One manufacturer said, “There are fewer buyers calling for offers. This is still a sentiment-driven rally.”