To cope with high inventories in the domestic market and low demand, with effect from July 7, Sinopec has reduced offers for linear low density polyethylene on an ex-works basis by 11.8% on the month to Yuan 9000/MT (US$1328/MT), as per Platts.
With the coming onstream of Sinopec Zhenhai Refining & Chemical Company's 400,000 tpa LLDPE plant, the markets in China are faced with a supply glut amid weaker demand. Also, LLDPE, used in agricultural and industrial packing materials, typically experiences low seasonal demand between July and August.
Sinopec's offers for other PE grades have also dropped month on month- high density polyethylene injection grade was down by over 7% to Yuan 9000/MT, while low density polyethylene was offered at Yuan 10400/MT, down 5.5%. HDPE film grade was down 4.2% to Yuan 9200, yarn dipped 3.8% to Yuan 10000, blow molding fell 3.2% to Yuan 9100.
These reductions in PE prices in the domestic markets of China are expected to negatively impact PE prices in Asia. This is because conventionally, Sinopec prices have a significant impact on the CFR Far East Asia benchmarks, as overseas producers and Chinese distributors take pricing cues from Sinopec's ex-works fixed prices. Chinese distributors also refer to Sinopec's PE fixed price to set their ex-warehouse spot offers.