Gap between China and SE Asia’s PP, PE markets narrows

Southeast Asia’s PP and PE markets were trading at their highest premium in several years compared with China in mid-March on the strength of the ongoing oversupply situation in China and comparatively good demand from Southeast Asia relative to China, as per ChemOrbis. However, the gap between the two markets is starting to narrow as Chinese players gradually digest the market’s excess stocks while greater availability in Southeast Asia has encouraged buyers to retreat to the sidelines to wait for more attractive prices. According to data from ChemOrbis Price Index, prices on a CFR SEA basis are currently trading at a premium of around US$50-55/ton over CFR China prices after the premium had reached a multi-year high at slightly over US$90/ton in the middle of March. Players in China report that the market is showing some signs of stabilization as the market begins to pare down some of its excess stock levels. “Total PP and PE stocks are down from over 1 million tons to around 700,000 tons now. We think that prices on the lower end of the range will see some additional increases towards the middle of April,” a distributor based in Taizhou commented. Other players still place current stocks at around 800,000 to 900,000 tons, but most are in agreement that the market is nearing the bottom after opening the period after the Chinese New Year holidays with five consecutive weeks of decreases. Meanwhile, Southeast Asian buyers have been keeping to the sidelines in anticipation of seeing some additional decreases in the days ahead. A woven sack converter in Vietnam said that they purchased 100 tons of Saudi Arabian raffia after negotiating a $15/ton discount from their supplier. “Our supplier was not able to meet all of our needs, so we are now searching the market for similarly priced cargoes,” the buyer said. An Indonesian converter reported receiving a $10/ton decrease for both import and local raffia while adding that they plan to keep to the sidelines as they are feeling comfortable with their stock levels. According to ChemOrbis, in the HDPE film market, CFR China prices regained a premium of around US$5/ton this week after prices on a CFR SEA basis had traded with a premium of just under US$55/ton in the middle of March. A Chinese trader offering Middle Eastern and Iranian HDPE cargoes commented, “Domestic producers are taking a firmer stance on their prices and this has provided some support to the import market.” A trader offering Middle Eastern HDPE film to both China and Southeast Asia reported, “We think that Chinese demand will come back once the current supplies are used up. Buying interest in Southeast Asia seems a bit softer for now.”