SEA PE premiums over China narrow to year’s lowest

Bearish sentiment persisted across PE markets in China and Southeast Asia throughout October, as unfavorable supply-demand fundamentals and eroding upstream costs continued to weigh on sentiment. As of the week ending October 17, both regions recorded rollovers to additional price cuts, driving PE values to fresh multi-year lows in Southeast Asia and bringing China’s import prices to similar territory. The continued weakness on both sides resulted in a sharp narrowing of price differentials between the three main film grades across the two regions.

Price gaps gradually narrow since August

According to ChemOrbis Price Index data, PE price deltas between China and Southeast Asia have been on a steady decline since August, with visible reductions in October. The trend reflected China’s relative price resilience during the “Golden September – Silver October” period, despite the lingering weakness in both markets.

Last week, LDPE film prices in Southeast Asia stood only $15/ton above China, while HDPE film carried a premium of about $10/ton. These gaps have marked the lowest since early January. For LLDPE film, China’s prices averaged around $20/ton below SEA levels—a spread nearly one-third narrower than in early September and the tightest in the past year.

Compared to early August, SEA’s premiums over China have eroded by roughly $30/ton for HDPE film, $50/ton for LDPE film, and $72/ton for LLDPE film.

ChemOrbis data also show that Southeast Asia’s LLDPE and HDPE film prices have converged to their lowest levels in more than five years, while LDPE film values sank to their weakest since January 2024, with some US-origin offers slipping below the $1000/ton threshold for the first time since then.

In China, LDPE film fell to its lowest level since early June, and sub-$1000/ton offers reappeared after around four months of absence. HDPE and LLDPE film prices were also on a weak footing, hitting their two-month lows.

Similar trend to last year, different story

A similar narrowing of PE price gaps between the two markets was also observed in the first half of October 2024, when differentials tightened to around $5-35/ton. However, last year’s convergence occurred amid a firming trend in China supported by seasonal factors and relatively stable conditions in Southeast Asia. In contrast, this year’s narrowing stems from synchronized declines in both regions, with China’s downturn proving less severe than that of Southeast Asia.

Market conditions unfavorable on all fronts

Downstream consumption failed to pick up meaningfully in either region despite the traditional peak season. In China, converters maintained conservative procurement strategies, citing slow orders from packaging, consumer goods, and agricultural sectors. High finished-goods stocks and reduced operating rates among film manufacturers further dampened resin demand.

Similarly, in Southeast Asia, weak macroeconomic sentiment, concerns over tariff hurdles, and low order entry curtailed downstream activity. “Demand remains tepid. Prices continue to move lower, and most market participants have adopted a wait-and-see stance,” a Vietnamese trader said. An Indonesian converter lamented, “Orders are very limited, even as the year-end approaches. It’s becoming more difficult to run a business nowadays.”

Supply-side conditions further reinforced the bearish tone . In China, domestic inventories remained elevated with huge accumulations post-holiday and a slow destocking pace due to sluggish offtake. Meanwhile, a steady inflow of competitively priced US-origin cargoes compounded regional length, injecting ample availability to oversupplied markets and prompting other suppliers to trim their offers to stay competitive.

A Chinese trader remarked, “Prices are steady to softer. Supply remains long, and downstream demand has not improved despite being the traditional peak season.” Another trader added, “Buyers are only asking for offers based on need. There’s no momentum to support any recovery at this point.”

Upstream cost support also waned through October. As of mid-October, Brent crude futures slid to its weakest close since early May amid rising US inventories, renewed US-China trade frictions, and signs of easing geopolitical risks. Besides, spot ethylene prices across Asia extended their losses on weak derivative demand and oversupply, with China’s level standing at the weakest point since early June and Southeast Asia seeing the price hovering around more than a two-year low. The erosion in feedstock costs further undermined producers’ cost pass-through ability, forcing them to concede to lower PE offers to secure deals.