Higher costs unable to push Polyethylene deals higher in Asia

In Asia, Polyethylene deals were reported with rollovers to decreases from producers’ initial offer levels as stronger upstream costs failed to generate sustainable increases in the region’s PE markets, as per Chemorbis. Weakness in PE markets is beginning to make itself felt on spot ethylene prices, which recorded some slight decreases on Thursday on a CFR Northeast Asia basis due to fears that ethylene availability will loosen in the region as PE producers are reported to be considering reducing operating rates in the face of their unviable production margins. According to data from ChemOrbis Price Index, spot LDPE film prices on a CFR China basis are stable when compared with the same period from last month while HDPE film prices have gained US$30/ton and LLDPE film prices have lost US$10/ton on the high end while holding steady on the low end. During this same period, crude oil prices have gained more than US$6/barrel, spot naphtha prices on a CFR Japan basis have jumped US$70/ton and spot ethylene prices on a CFR Northeast Asia basis have risen nearly US$60/ton. This has left all overseas producers offering HDPE and LLDPE film operating well below their theoretical production costs while the lower ends of the HDPE and LLDPE film ranges are scarcely at par with spot ethylene prices. Even with spot PE prices failing to move higher with costs, PE producers have so far been unable to push through any real increases on their deal prices. A major global producer announced their May prices this week with decreases of US$40/ton for Singaporean LLDPE film and rollovers for Middle Eastern HDPE film. PE sellers in Southeast Asia have also been forced to concede to lower prices on their deal prices as buyers in the region have been unwilling to purchase beyond their needs for the past several weeks due to the ongoing lack of a clear picture regarding the market direction. A major Middle Eastern producer announced their April prices to Malaysia this week with decreases of US$10-20/ton for HDPE film and US$20/ton for LLDPE film when compared with their most recent March price levels. A Southeast Asian producer reported that they managed to conclude a small number of HDPE film deals this week after agreeing to reductions of $10-20/ton from their initial offer levels. Inside Indonesia, a converter reported that they secured some domestic HDPE film at prices US$55/ton below the prevailing producer price level, while distributors in Malaysia reported that they are considering giving some discounts to customers willing to make purchases in the face of persistently stagnant demand.