Caution reigns in Asian spot PE market : high end offers fading

In Asia, caution has reigned in the spot PE market in the first trading week post-Chinese New Year holidays, as players are reluctant to stake out firm positions as the true status of demand in China remains unclear. As per Chemorbis, although the holidays officially ended last week in China, many converters are on extended holidays, leaving the market rather muted for this week. Elsewhere in Asia, buyers are keenly watching developments inside China before formulating their own purchasing strategies. As market participation remains lackluster, most producers have announced their initial March offers with rollovers from their pre-holiday offer levels, until market direction becomes clearer. Although most sellers’ offers are firm at these levels, pre-holiday producer offers at the upper end of the range have been withdrawn to move back in line with the general market level, resulting in a marked narrowing of the overall import ranges. In the last few days before the holidays, the upper and lower ends of the reported price ranges for major PE products were quoted at widely divergent levels because of previous supply problems particularly for LLDPE and LDPE. Inside China, the gap separating the highest reported offers from the lowest reported offers stood at US$200/ton for LDPE film, US$170/ton for HDPE film and US$160/ton for dutiable LLDPE film, while in Southeast Asia the gap between the highest and lowest ends of the reported ranges stood at US$150/ton for HDPE film and US$120/ton for LLDPE film. This week, the gaps separating the high and the low ends of the import PE ranges have contracted noticeably, while the gaps separating offers for mainstream Asian and Middle Eastern origins from offers for deep-sea cargoes have also shrunk. As of this Friday, the gap separating the high and the low ends of the import offer ranges to China stands at US$170/ton for LDPE film, US$120/ton for HDPE film and US$110/ton for LLDPE, while the gaps separating the high and the low end of the ranges in Southeast Asia have shrunk to US$80/ton for both HDPE and LLDPE film. In addition to the lack of buying interest seen at the upper ends of the ranges, high end offers have come under pressure from eroding spot ethylene prices, which have declined by around US$70/ton vs pre-holiday price level. However, with crude oil prices hovering near US$80/barrel and supply levels remaining limited, sellers say that they intend to stand firm at their current offer levels while waiting for Chinese buyers to return to action.