Lengthening supplies maintain downward pressure on China’s PE market

Players in China report that lengthening PE supplies are maintaining downward pressure on prices. Producer sources in both the domestic market and the import market are complaining of excess stocks while larger than normal shipments of Central Asia and North American materials have amplified oversupply concerns, as per ChemOrbis. Downstream, converters report that demand for their end products remains slower than expected as a result of which some have reduced their operating rates. Traders reported seeing greater availability for North and South American cargoes this week. “We managed to conclude some deals for Mexican LLDPE film at prices close to the low end of this week’s overall offer range and we still have around 3,000 tons of this material to offer this month,” reported a trader in Shanghai. A trader based in Ningbo added, “We feel that China will receive larger than expected shipments of several origins this month as globally poor demand will push overseas sellers to try to offload their excess cargoes in China.” Meanwhile, mainstream producers reported that they are also struggling with high stock levels. “We managed to conclude some deals for HDPE film with US$120-130/ton decreases this week,” a source at a South Korean producer told ChemOrbis. “We are feeling some stock pressure these days and are willing to offer prompt shipment terms to our customers in order to speed up our sales,” the source added. A source at a global producer stated, “We are thinking of agreeing to give retroactive discounts on our prices after the fashion of Chinese producers as we have not been satisfied with our sales recently.” Inside China, a source from a domestic producer stated that they are mulling reduction in operating rates in order to limit their financial losses and pare down their existing stock levels. “This has been a very difficult year for us as producers using coal-to-olefins technology have been using their advantageous cost structure to expand their market share at the expense of naphtha-based producers. We are operating at a considerable loss these days as we are still using raw materials purchased 2-3 months ago when upstream costs were higher,” a producer source commented. In addition to supply difficulties at existing plants, China is set to add another 700,000 tons of domestic capacity next month as Fushun Petrochemical will bring on-line new HDPE and LLDPE plants, both of which will have a capacity of 350,000 tpa. On the converters’ side, a plastic bag manufacturer confirmed a reduction in operating rates from 80% to 60% this week as they are seeing slower than expected demand from their primary export markets in Japan and the US. “We are not interested in purchasing beyond our immediate needs for now,” the buyer commented.