Sky-high US PE film prices test affordability in SEA as Mid-East ceasefire alters sentiment

Southeast Asia’s PE market continues to face a persistent shortage of Middle Eastern and regional supply. Amid these disruptions, US sellers have stepped in aggressively, offering material at sharply elevated levels that have effectively redefined the regional pricing landscape. However, the workability and sustainability of these offers are increasingly being questioned amid a notable shift in market sentiment.

The announcement of a two-week ceasefire in the US-Iran conflict has raised expectations for the reopening of the Strait of Hormuz, easing supply concerns and prompting buyers to anticipate softer prices ahead.

US offers emerge at unprecedented levels

US-origin PE cargoes have entered the Southeast Asian market at historically elevated levels, with current offers for LDPE film reaching as high as $1900/ton CIF, while LLDPE and HDPE film are quoted up to $1650/ton CIF. These levels mark a significant departure from typical US pricing in the region and even exceed prevailing offers for Middle Eastern material.

Despite the increased availability of US shipments, market acceptance remains limited. A regional trader in Indonesia noted, “While US offers are widely circulated, producers have maintained firm and elevated price nominations. The rapid escalation in prices has outpaced demand, resulting in subdued transaction volumes. Buyers continue to request quotations to monitor the market, but actual purchasing activity has remained thin,” reflecting a cautious and resistant demand base.

Can record-high US offers be sustained?

With US-origin offers entering uncharted territory, the sustainability of such elevated levels is coming under scrutiny as downside risks begin to emerge. The market’s focus is now shifting from supply scarcity to the resilience of demand and the evolving geopolitical landscape.

Ceasefire shifts sentiment, introduces downside risks

The recently announced two-week ceasefire between the US and Iran, contingent on the reopening of the Strait of Hormuz, has significantly altered market sentiment. Iran’s commitment to ensuring safe passage through the strait has raised expectations of a gradual normalization in global energy flows. Although logistical bottlenecks mean that PE and feedstock supply from the Middle East may not recover immediately, the psychological impact has been swift and pronounced.

Crude oil futures have reacted sharply, plunging below the $100/bbl threshold as geopolitical risk premiums unwind. This decline potentially translates into lower naphtha and ethylene values, eroding cost support for PE producers. As a result, sellers may find it increasingly difficult to justify or sustain current elevated offer levels in the face of weakening upstream fundamentals.

At the same time, demand conditions remain fragile. Buyers across the region have resisted sharp price increases, citing limited ability to pass on higher costs. A Vietnamese converter highlighted, “Our purchases are based on downstream acceptance; otherwise, we must reduce operating rates. We are operating at only around 50% capacity, as some end-users have refused to accept higher prices.” With expectations that prices could be corrected at any time, many buyers prefer to limit purchases to immediate needs.

Long lead times amplify risk, dampen buying appetite

In addition, the long lead times associated with US shipments have further dampened buying interest. Cargoes scheduled to arrive in two-three months expose buyers to heightened market risk, particularly in an environment where geopolitical developments are rapidly reshaping price expectations.

A Vietnamese trader noted that the temporary suspension of conflict between the US and Iran has reinforced expectations of a near-term price decline. He added, “US offers remain elevated and involve distant delivery. We prefer to avoid such commitments, as prices may soften by the time cargoes arrive.” Instead, procurement is limited to hand-to-mouth buying, with Chinese-origin material continuing to serve as the preferred option due to its relatively shorter lead times and greater pricing flexibility.