PE buyers in Asia wait in the sidelines as China’s domestic market weakens

Trading activity in Asia has dipped considerably this week as buyers anticipate a drop in regional PE in line with falling prices in China’s domestic market. As per Chemorbis, high stock levels inside China provide further support to buyers’ case for lower prices, along with continued weakness in Asia’s spot ethylene market. In both China and in Southeast Asia, fewer import offers were reported this week as several mainstream sellers have suspended offers on lack of demand, as reported offers generate limited interest. Inside China, offers for locally-held materials posted declines ranging from CNY150-450/ton (US$22-66/ton) on the week. Comparing the prevailing offers for domestic material with the offers reported in the import market, import prices are currently carrying premiums of US$75/ton for LDPE film, US$70-80/ton for HDPE film and US$65/ton for LLDPE film after customs duties are taken into consideration. In view of the gap between import offers and local prices, many traders are now predicting that import sellers will need to adjust their offers downward to remain competitive. Another factor weighing heavily on Asia’s PE market is the excess stock levels being carried by major traders and distributors inside China. Although sellers report that demand regained some strength following this week’s price cuts, Chinese traders are still looking for alternative outlets for their high stock levels. A number of Vietnamese distributors reported receiving re-export offers for Iranian HDPE film from traders in China this week, while an international trader offering South Korean LLDPE film originally destined for China reported diverting their cargoes to the Southeast Asian market in hopes that buyers in Southeast Asia would show greater interest in their material. One larger trader in Vietnam reported receiving an offer for 1,700 tons of Iranian HDPE film from a Chinese trader at a very attractive price, although they commented that they are not interested in purchasing this cargo as they expect to see even better prices emerging in the days ahead. Although demand is doing better in Southeast Asia than in China, buyers in the region are carefully monitoring developments in the Chinese market and are hesitant to purchase more than their minimum requirements as they also anticipate some downward price movement. A distributor in Vietnam complained that demand in their own local market was poor, adding that they had tried to re-export some materials to China this week without success. In addition to the weakness in China’s PE market, buyers in Southeast Asia also point to softer ethylene feedstock costs as additional support for their hopes of lower prices. When compared with the same period in the prior month, spot ethylene prices on a CFR SEA basis have lost $200/ton, with ethylene prices to Southeast Asia losing ground even quicker than the erosion in prices seen in Northeast Asia, where spot ethylene quotes are down around $150/ton when compared with the same time last month.