Players in PE markets of Asia and Mediterranean report that sellers have been forced to reevaluate their initial increase targets for March in the face of widespread resistance from converters and slower than expected demand, as per Chemorbis. Recent events in upstream markets, which have seen crude oil and naphtha feedstock prices take a step back after racing ahead to two year highs have also contributed to sellers’ loss of confidence in their ability to push through the full extent of their original March increase targets.
Chinese buyers returned to the market to secure some cargoes last week after crude oil futures on the Nymex jumped to their highest levels since 2008, eventually reaching a year-to-date high of US$105.44/barrel on March 7. Domestic producers announced increases of CNY100-300/ton (US$15-46/ton) at the start of the week in accordance with higher upstream costs. However, producers began to lose confidence in their ability to achieve higher prices as crude oil and naphtha prices began to retreat from their early month highs and spot ethylene prices also began to move lower. One Chinese producer conceded to a reduction of CNY100/ton (US$15/ton) on their offers yesterday, while distributors reported that they are prepared to consider discounts of CNY50-100/ton (US$8-15/ton) for buyers willing to place firm bids.
PE demand has been disappointing since the end of the Chinese New Year holidays as converters have been operating at reduced rates in the face of a labor shortage in the coastal regions of the country while complaining that their operating margins have been impaired by persistently rising raw material costs. Converters now say that they are planning to delay their purchases for as long as possible in anticipation that sellers will agree to some reductions over the next few weeks assuming that upstream costs continue to step back from their early month highs. Poor demand in China has also had a spill-over effect on the nearby Southeast Asian market. Southeast Asian producers who would normally export to China have increased their availability to the region this month in response to weaker demand from Chinese buyers while a number of traders have reported receiving re-export offers from the bonded warehouses in China as Chinese traders struggle to liquidate their stocks. A Southeast Asian producer reported that they concluded some deals for LDPE film this week at prices US$50/ton below their initial sell ideas for the month as their initial price targets proved unworkable. This week, a trader from Taiwan reported that they are diverting some Thai LDPE film they had originally planned to offer to China to Southeast Asia instead owing to poor demand within China.
PE sellers in Turkey have also complained that they have been unable to achieve their price hike targets for March in spite of the significant upward movement in upstream costs. Although sellers had initially approached the Turkish market with increase proposals for March, most deals are being concluded at prices close to the February done deal levels as converters have only been purchasing in small amounts this month, with most buyers claiming that they have enough material in stock to cover another one to two months of production. Chinese traders have also turned to the Turkish market as a possible re-export destination, with one trader in Turkey reporting that they received offers for Middle Eastern and West European HDPE film cargoes from a Chinese trader.