China, SEA PE markets continue uptrend under shadow of falling futures

China, SEA PE markets continue uptrend under shadow of falling futures

The post-holiday PE upturn in China and Southeast Asia has persisted for the third week in a row, supported by limited supplies, strong ethylene, and the fact that CFR China/SEA prices still lag behind other global markets.

Meanwhile, the recent decline in LLDPE futures has raised caution among players. May LLDPE futures on China’s Dalian Commodity Exchange posted a combined decrease of CNY530/ton ($81/ton) on Tuesday and Wednesday. Players blamed the recent pullback in crude oil prices.

Oil prices jumped 4% on Friday, March 5, as supply outlook for the near term tightened further following the news of an extension of OPEC’s production cuts into April. A drone attack on Saudi Arabia’s Ras Tanura oil export hub on Sunday, March 7, exacerbated the upsurge in the energy markets, sending Brent crude oil above $70/bbl on Monday. Since then, however, Brent has pulled back, and May futures settled at $67.52/bbl on Tuesday, March 9.


Import prices see new thresholds in China

Overseas suppliers have approached China and Southeast Asia markets with higher offers this week, pointing to still limited supplies across the globe and strong feedstock ethylene.

In China, import LDPE film prices for Middle Eastern origins rose $30-40/ton from last week to around $1540-1600/ton CIF, cash. The last time LDPE prices touched the $1600/ton threshold in China was September 2014.

LLDPE and HDPE film prices for the same origin have also hit a new threshold which is $1200/ton CIF. Mid-Eastern LLDPE offers have climbed $40/ton on the week to $1170-1230/ton, while HDPE rose $10-30/ton to $1160-1210/ton.

“Import prices have seen fresh hikes, although buyers in China are still not willing to accept such high levels amid falling futures. The number of deals is limited, particularly for HDPE. On the other hand, sellers stay firm on their offers since the current price levels in China still lag behind the rest of the world,” explained a few players.

A converter in China also commented, “We have received import PE offers with additional hikes this week. Although it is not easy to pass on the higher costs to our customers, we have purchased some volumes to hedge against further price increases.”

A few other buyers added that they continued to refrain from purchasing beyond their urgent needs, saying, “We will wait and see how the recent pullback in Dalian futures will impact sentiment.”


SEA rises in tandem with China

Markets in Southeast Asia have tracked a similar trend.

According to regional players, LDPE film offers for Middle Eastern origins have increased further to hit the $1700/ton CIF threshold this week. LLDPE and HDPE film prices, meanwhile, have seen new high levels at and above $1300/ton CIF.

Traders in Vietnam said, “Purchasing volumes are quite limited, and players particularly refrain from deep-sea cargoes as they worry that prices might reverse course suddenly. However, local traders’ inventories are low. Supplies in Vietnam may get even tighter in the upcoming months. Tightness may keep PE prices elevated in the near term.”

“Buyers are adopting a wait-and-see stance mostly and only buying when they need. They closely monitor the market developments, and any sign of a price reversal can push them to the sidelines. Hence the decline in China’s LLDPE futures has become an important factor to watch,” regional players noted.

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