First trading day of 2010 brings price hikes to Asia’s local PE markets

In line with market expectations, domestic price increases were witnessed in markets of China and Southeast Asia on the first trading day of 2009, as per Chemorbis. In addition to bullish market sentiments, factors such as persistently firming upstream costs, expectations of supply constraints and reports of better end product demand from the packaging sector have all contributed to the recent price hike. This week in China, CNPC announced price hikes of CNY300-700/ton (US$44-103/ton) for LDPE film, CNY150-200/ton (US$22-29/ton) for LLDPE film and CNY200/ton (US$29/ton) for HDPE film. Sinopec also announced price hikes- raising LLDPE film offers by CNY200/ton (US$29/ton) to the South, HDPE film offers by CNY200/ton (US$29/ton) to the East. These price hikes have been attributed to higher LLDPE futures prices, firming crude oil and ethylene feedstock costs as well as higher offers in the distribution market. Demand is said to be mostly normal when compared with pre-holiday week, although a few sellers reported that buying interest has not been particularly hampered by the recent rise in domestic prices. Offers for domestic material stood at CNY13000-13600/ton ex-warehouse China, cash inc VAT (US$1627-1702/ton without VAT) for LDPE film, CNY11400-12750/ton with the same terms (US$1427-1596/ton without VAT) for LLDPE film and at CNY10550-11000/ton ex-warehouse China, cash inc VAT (US$1321-1377/ton without VAT) for HDPE film. In Southeast Asia PE prices rose in line with the market expectations although several buyers were disappointed as they has anticipated lower domestic prices for 2010 with the implementation of the ASEAN-6 FTA. A producer in Indonesia reported lifting their offers for both HDPE and LLDPE film by US$40/ton on the first day back from the holidays, bringing their new offers to US$1440/ton FD Indonesia, cash for LLDPE film and to US$1410/ton with the same terms for HDPE film. The producer cited their limited availability as the reason for their price hikes. In reaction to the producer’s price increase, a few distributors in Indonesia elected to withdraw the discounted offers they had been giving in the last trading days of 2009 to re-adjust their prices closer to par with the producer price level. In Malaysia, domestic offers for January have yet to be announced, although price ideas reported by both converters and producers suggest that initial January offers will be MYR180-200/ton (US$53-58/ton) higher when compared with the December offer levels. A converter in the packaging sector stated that they are prepared to accept increases of up to MYR200/ton on January business as demand for their end products is picking up in line with preparations for the Chinese New Year and they are feeling confident of their ability to pass higher raw material costs onto their end product prices. A distributor in Thailand reported lifting their offers by THB500/ton (US$15/ton) for LLDPE film and THB1000/ton (US$30/ton) for HDPE film this week while a distributor in the Philippines, who reported receiving higher import offers for Middle Eastern cargoes, said that they are planning to announce higher prices on their offers to the local market soon based on firming regional trends and bullish market sentiment.