LLDPE prices rise in Asia on supply concerns, improving demand

Asian PE markets have posted considerable increases over the past two weeks on the strength of stronger upstream costs and improved buying interest, as per Chemorbis. Crude oil prices have gained over US$5/barrel over the past week to cross the US$82 threshold, while spot ethylene prices have posted week on week gains of US$45-60/ton. Spot naphtha prices have also spiked by US$39/ton over the past week. In the derivative segment, some of the fastest increases have been observed in the LLDPE market, where supply concerns coupled with impending high season for agricultural film have encouraged strong buying interest from converters. According to data from ChemOrbis Price Index, import LLDPE film prices in China gained US$40-70/ton this week while HDPE and LDPE film prices recorded relatively smaller increases of US$20-50/ton. In Southeast Asia, import LLDPE film prices shot up by US$25-120/ton this week while import HDPE film prices rose at a slower rate of US$20-70/ton. Two Southeast Asian producers are reported to have sold out their August allocations for LLDPE film to the Chinese market. A Thai producer commented that their August deals were concluded with cumulative increases of US$90-100/ton over the course of the past two weeks. Traders in China and Vietnam have reportedly lifted their offers by US$100-105/ton this week, and await deal conclusion at their new offer levels. However, higher end offers may see more interest next week, as the low end of the import offer range is expected to dwindle as most cargoes that have been purchased have been at the lower end of the range. Converters have responded to rising PE prices in Asian markets by stepping up purchases, although most buyers continue to avoid making purchases in large amounts given their expectations that the current cost-driven PE price increases will not prove sustainable over the medium term due to the lack of sufficient support from the downstream sector. Demand for LLDPE, however, is entering its high season in Asia as re-exporters begin preparations for their Christmas orders while converters in the agricultural film sector are also beginning to replenish stocks ahead of the upcoming high season for their end products, which generally begins in mid-August in China. LLDPE buyers received a further incentive to secure some cargoes this week upon hearing news that ExxonMobil had to shut down its 600,000 tpa LLDPE plant in Singapore following an extruder problem. The plant is expected to be off-line for the next two weeks. Inside China, Yangzi Petrochemical is conducting a month-long shutdown at its 200,000 tpa LLDPE plant in China.