PE prices moved higher in China this week on the strength of firmer energy prices and reduced inventory pressure on the part of sellers. Inventory pressure has reduced following last week’s brisk sales reported after Middle Eastern producers announced initial November prices, as per ChemOrbis. Prices are not expected to witness any significant changes over the short term as many buyers remain uncertain of the medium term feasibility of the current price levels.
Brisk sales by Middle Eastern producers followed the steep discounts from October levels for initial November prices for LLDPE and HDPE film. Offers from these producers, which constituted the low end of last week’s import range, disappeared this week as the producers claim that they have already sold out stocks for November. Buyers were said to have been more active in the market last week as lower November prices tempted converters back to the market to restock after a prolonged period of reduced purchasing activities.
Sellers believe that the initial November prices seen in the market last week represented the bottom of the current trough, commenting that they cannot afford to give any additional decreases on prices, as the low end of the import LLDPE film range is currently trading beneath theoretical production costs for PE based on spot ethylene prices. Sellers also point to firmer energy prices as support for their contention that prices cannot move any lower as crude oil prices on the NYMEX have remained above the US$90/barrel threshold since October 24 while LLDPE futures prices in China have firmed up over the past two weeks.
Widespread speculation that the Chinese government may begin to relax its monetary tightening measures over the coming weeks has also bolstered sellers’ hopes of a stable to firmer PE trend. On the buyers’ side, converters report that they remain hesitant to purchase in large amounts as the global economic outlook remains cloudy and demand for their end products has not really improved recently, as per ChemOrbis. Buying interest was said to have weakened this week after picking up last week as many converters returned to the sidelines after covering their immediate needs at the lower end of last week’s price range. While crude oil prices have strengthened over the past two weeks, buyers commented that this has not prevented further decreases in spot ethylene markets. Spot ethylene prices on a CFR NEA basis declined over the past week and are down compared to the beginning of October. Upstream, several Asian cracker operators have announced that they are lowering their operating rates for November and December as they are not feeling optimistic about the demand outlook for ethylene derivatives.