Import LDPE film markets in China and Southeast Asia
saw downward adjustments this past week first time after 4 months due to the unfolding supply-demand imbalance following the end of the maintenance season. It was palpably evident that declines loomed on the horizon in the previous three to four weeks given the downturn that had already kicked in across HDPE and LLDPE markets.
In China’s import LDPE film market, first drops have been observed since mid-March when prices started to follow a stable to firmer path. Similarly, in Southeast Asian import LDPE markets, prices had been on a stable to higher trend since late April. Following this week’s discounts, import LDPE film prices in both markets dropped from levels that had not seen in almost two years.
PE plants return from maintenance shutdowns
The easing supply situation is surely the main culprit behind the recent ease in prices after a long time.
According to ChemOrbis Production News Pro, there are at least 6 LDPE plants with more than 1.5 million tons per year production capacity that have been gradually resuming production throughout July following their return from planned turnarounds. In Southeast Asia, Thai PTT was also scheduled to shut its 345,000 tons/year LDPE plant in June, which was expected to return in July as well.
In August, there is only Sinopec Shanghai PC planning to shut its two LDPE lines, according to the latest information ChemOrbis Production News Pro suggests; but their capacities are minimal, which is not expected to create any concerns.
Falling futures added to the weak fundamentals in China
Although LDPE supply remains short in China, the market has eventually surrendered to the downtrend across other PE markets due to the lingering demand weakness, coupled with unsupportive futures prices.
“Buyers are not willing to purchase at the moment as prices are expected to go down further. Procurements are still need-based. We don’t see the market improving in July and August. It is likely to keep weakening until 2025” commented a Chinese manufacturer. A Chinese trader also pointed to the poor demand conditions, saying “It is off season for downstream industries, leading to slow transactions. Lower local prices also dampened the import market. Additionally, there has been an increase in the arrival of imported cargoes, leading to an overall growth in supplies. Under such a supply-demand pressure, we believe that there is still a room for further declines.”
Freight markets turn edgy; China’s economic growth disappoints
On the cost side, freight rates are reportedly getting lower, dampening sentiment across import markets. However, as they have skyrocketed over the past few months, they are still too high to erase all the support they provide. “Global container freight rates have bolstered polymer prices to a certain extent,” noted a source from a South Korean producer.
Besides the high shipping costs, ethylene prices on CFR China basis have not seen a decline since the beginning of the current month. Spot ethylene prices were assessed stable from last week at $860/ton CFR China as of July 18. Nevertheless, they haven’t also seen a significant improvement since mid-June when they dropped to the lowest levels not observed since early September 2023.
Looking at other factors, another Chinese trader reported limited guidance from the macroeconomic end. “China’s GDP growth in the second quarter has slowed down, falling below expectations as domestic consumption has stalled,” noted a Chinese converter.
As of July 18, Import LDPE film prices for all origins were assessed $10-30/ton down from last week at $1110-1210/ton on CIF China, cash basis.
Waning demand hits Southeast Asian markets
“Demand has been struggling with the previous sharp hikes for polymers. Soaring freights have made it difficult for converters to ship their finished products, which has led to further cuts in restocking raw materials like PE,” opined a Southeast Asian trader. Since the restart of several major Middle Eastern and Asian plants, regional supply is reportedly lengthening. “There will be further pressure on spot prices,” added the trader.
Although some producers maintained their LDPE offers, citing still high shipping costs and stable upstream chain, other sellers preferred to adjust their prices down to generate better buying interest as demand was reported to be “quite bad”.
Same story applies to Southeast Asia: Costs, freights and economic
However, it looks challenging for suppliers to keep prices on the firm side as ethylene prices have been stable to lower since early March when they reached the highest level seen since late August 2022, according to ChemOrbis Price Wizard. As of July 18, spot ethylene prices were assessed stable from last week at $930/ton CFR SEA.
In the meantime, similarly to China, economic conditions also suppress the demand in the region. “LDPE offers managed to stay stable this week. However, supply-demand fundamentals are weak. Southeast Asia’s demand also continues to be hit by the strong US dollar. Thus, we see prices trading lower over the near term” commented another Southeast Asian trader.
“Economic growth of Southeast Asian countries has been slower than expected and this situation has impacted the demand and consumption of consumer goods made out of polymers,” opined a source from a Southeast Asian producer.
In Southeast Asia, import LDPE film prices for all origins were assessed $30-60/ton lower compared to a week earlier at $1180-1320/ton on CIF SEA, cash basis. Meanwhile, a Malaysian producer informed that bids from buyers were quite low for PE products, saying “Buyers’ bids for LDPE are below $1200/ton mark.”
