PE correction outpaces PP in SE Asia; LLDPE sinks deeper below homo-PP

Following an exceptional war-driven rally, Southeast Asia’s import PE and PP markets entered a correction phase after reaching multi-year highs in early April. Although both polyolefin markets have trended lower since then, PE prices have fallen more sharply as sellers implemented increasingly aggressive reductions to stimulate demand, while PP prices proved relatively more resilient despite facing similar macroeconomic and downstream challenges.

As a result, the gap between April peak levels and current prices has widened faster for PE than for PP, highlighting the heavier pressure facing polyethylene markets amid intensifying import competition and persistently weak demand.

PE downturns outpace PP as LLDPE bears the brunt

The ongoing PE correction first emerged in the LLDPE and HDPE film segments around mid-to-late April before spreading to LDPE film in mid-May. Notably, the pace of declines accelerated over the past month as sellers across all major origins repeatedly revised offers lower amid mounting supply pressure and sluggish buying interest.

PP followed a somewhat different trajectory. After recording its first corrections in the second half of April, the market largely moved sideways through much of May, with only limited and mixed adjustments observed across homo-PP and PPBC grades. It was not until the first half of June that PP prices resumed a more pronounced downward trend.
Consequently, PP has remained relatively more resilient than PE throughout the current correction cycle.

A comparison with the weekly averages recorded during the week ending April 17 highlights the differing pace of declines. PE film prices have fallen by roughly $200-250/ton from their peak levels, while PP grades have lost around $170-195/ton over the same period. The sharpest correction has been seen in LLDPE film, which has endured the longest decline among major polyolefins.

LLDPE loses long-held premium over homo-PP

Another notable consequence of the ongoing correction has emerged in the relative pricing relationship between polyethylene and polypropylene.

According to ChemOrbis Price Index data, import LLDPE film prices have fallen below homo-PP raffia prices in Southeast Asia, marking the first such occurrence since January 2023. Historically, LLDPE film had maintained a premium over homo-PP raffia for more than two years.

The reversal first appeared in late April when LLDPE film slipped to a discount of around $10/ton against homo-PP raffia. The gap widened further to nearly $50/ton during May before reaching approximately $75/ton by mid-June.

The widening discount highlights the disproportionate pressure facing PE markets. While both PE and PP have been affected by weak demand and growing import availability, the heavier inflow of competitively priced PE cargoes, particularly from China and the US, has accelerated PE’s correction and pushed LLDPE prices to unusually low levels relative to PP.

Import competition deepens as supply concerns fade

The sharper weakness in PE has largely been driven by stiff competition among import suppliers, with Chinese and US suppliers remaining the primary bearish influences. Chinese-origin PE continued to offer attractive alternatives across several Southeast Asian markets, particularly in the LLDPE segment. At the same time, competitive ex-US Gulf cargoes consistently exerted pressure, frequently setting the lower end of the market range and forcing other suppliers to adjust offers accordingly.

The impact has been most evident in LLDPE film, where Chinese and US materials were traded at parity at around $1100/ton CIF, cash, by mid-June. LDPE film also came under pressure from aggressively priced US cargoes, with deals reported in Vietnam at as low as $1280/ton CIF, cash, creating a significant gap with offers from other origins.

These levels not only represented three-month lows but also established pricing benchmarks that many other suppliers struggled to ignore. As low-priced cargoes continued to circulate, Middle Eastern sellers were increasingly compelled to offer additional discounts to remain competitive, accelerating the broader market decline.

Import availability has also expanded as Middle Eastern producers gradually increased offer volumes while regional supply concerns faded. Cargoes from other Northeast Asian origins and ASEAN became widely available across Southeast Asia, reducing buyers’ urgency to secure material and intensifying competition among sellers.

“Buyers are reluctant to replenish stocks, while sellers are carrying high inventory levels and are increasingly willing to lower prices to secure sales,” said a Vietnamese trader.

Bearish expectations fuel self-reinforcing cycle

While growing supply has intensified competition, weak demand has remained the fundamental obstacle preventing market recovery. Across Southeast Asia, buyers have largely maintained hand-to-mouth purchasing strategies due to slow finished-product orders and sufficient inventories on hand, with widespread expectations of additional price erosion prevailing among players.

“Buyers expect prices to decline further and therefore remain reluctant to replenish stocks. Most of them are adopting a wait-and-see approach, anticipating lower levels in the coming weeks,” a Thai trader commented.

Meanwhile, a converter said, “We are holding relatively high inventory levels, so we prefer to stay on the sidelines for now. Prices remain on a downward trajectory, and we expect the decline to continue through July.”

The bearish outlook has created a self-reinforcing cycle that continues to suppress trading activity. Buyers postpone purchases in anticipation of lower prices, reducing transaction volumes and prompting sellers to offer further discounts to move inventory. Each new round of price cuts reinforces expectations of additional declines, encouraging buyers to stay on the sidelines for even longer.

How much further can the correction go?

Recent signs of easing geopolitical tensions between Iran and the US have introduced a new bearish element into regional polyolefin markets. Brent crude futures retreated sharply following the latest diplomatic developments, reducing concerns over supply disruptions that had helped fuel the war-driven rally earlier this year.

With supply conditions becoming increasingly comfortable and buyers maintaining a wait-and-see stance, market participants are now debating how much further the correction can extend.

Although current prices remain above pre-war levels, the recent pace of declines suggests that a larger portion of the war premium could be unwound in the coming weeks if energy markets remain stable. Market players increasingly expect sellers to continue testing lower levels throughout July, particularly in the PE segment, where import competition remains most intense.

Whether prices ultimately revisit pre-war levels will depend on several factors, including crude oil movements, Middle Eastern production strategies and the timing of a demand recovery across Southeast Asia. For now, however, the market narrative has clearly shifted from supply concerns to downside price risk.