The upswing across China’s PP and PE markets took a breather this week, balancing between tight supply and escalating freight rates on the one hand and sluggish demand and plunging oil prices on the other. In the meantime, sellers continued to raise offers for Middle Eastern cargoes, marking the third week of successive hikes, even though the pace of increases cooled off.
LD maintains big gaps with others; PPH rose 12.5% y-o-y
Over the week ending on June 7, shipments of Middle Eastern homo-PP raffia and inj. were offered stable to $10/ton higher from the previous week at $930-950/ton CIF, China. Offers for PE film grades from the region also saw rollovers to $10/ton increases, at $1080-1140/ton for LDPE film, $980-1020/ton for HDPE film, and $970-1010/ton for LLDPE film, with the same terms.
Data retrieved from ChemOrbis Price Index reveal that LDPE film continued to outperform PP and the other two main PE film grades with multi-month premiums. A trader explained, “LDPE is the strongest among other PE grades due to tighter supply, since LDPE has been more affected by shutdowns.”
The weekly average price of HDPE film for Middle Eastern origins climbed to the $1000/ton threshold, indicating the highest level since late March 2023. Meanwhile, homo-PP raffia and inj. posted a gain of 12.5% on a yearly comparison, the data shows.
Combination of freight soar, supply tightness
The global shipping crisis, mainly caused by the Red Sea tension and a lack of capacity, has resulted in skyrocketing freight rates, with players reporting a threefold increase in the rates from the Middle East to Asia destinations.
This external factor of escalating shipping costs inevitably translated into rising prices for this origin across China’s polyolefin markets. On top of that, several shutdowns amid the maintenance season in the region kept tightening supply, especially for LDPE.
“Supply remains short on the back of the Q2 plant turnaround season, with many Middle Eastern plants being shut down for maintenance. Along with a dearth of availability, soaring freight rates lead to higher offers for PP and PE raw materials,” another trader noted.
Sentiment takes a hit from plunging energy markets
In the previous week, sellers issued larger increases of $10-30/ton for Middle Eastern materials, with the price range for LDPE film from the Middle East recording the biggest increases of $30/ton on both ends. However, the recent free fall in oil prices has cast a shadow over market sentiment, forcing sellers to scale down their previous hike attempts.
Besides, a persistent slowdown in demand due to the off-season has still pressured the markets, contributing to sellers’ faded confidence. “The market trading atmosphere significantly weakens, while cost support signals an erosion because of the sharp decline in crude oil,” said a participant. He added, “Demand remains lackluster, as June is the traditional domestic off-season.”
