Lower upstream costs pull down Asian PE markets

Spot ethylene prices In Asia have been on a downtrend, falling by US$50/ton in the past week as per ChemOrbis. Since the beginning of June, the decrease amount is much larger at approximately US$150/ton. These decreases stem from bearish market sentiments and ample supplies in the region. Buyers are generally avoiding firm bids, electing to adopt a wait-and-see stance due to the ample supply levels, especially in Southeast Asia. Naphtha prices in Asia have fallen by US$20/ton in this week and US$35/ton since the beginning of the month. Crude oil prices have fallen below the US$95/bbl threshold on June 15th for the first time since February. Already limited PE demand in Asia has been feeling the effects of these remarkable decreases in upstream costs. Some players in China’s PE market had expressed early last week that the relentless decreases in PE prices were coming to an end as the market was close to bottoming out. However, the persistent decreases in upstream markets now hangover these expectations. Looking at China’s PE market, import LDPE film offers lost US$30-40/ton on CFR China basis while offers from bonded warehouses retreated by US$10-50/ton on FCA China basis. In the HDPE film market, import offers lost US$20/ton at the low end of the range, while prices from the bonded warehouses remained stable week on week. Dutiable import LLDPE film offers were stable over the last week but non-dutiable LLDPE film prices softened by US$10/ton at the low end. The local market also lost ground in China with domestic LDPE offers retreating CNY100-150/ton (US$15-23/ton) and locally held imported LDPE film offers losing CNY200-300/ton (US$30-46/ton). However, HDPE and LLDPE film prices stabilized during this past week following consecutive decreases. Meanwhile, the ongoing decreasing trend in LDPE prices is due to the particularly weak demand for this product while some domestic producers even issued reductions of as much as CNY500/ton (US$77/ton) this past week. In Southeast Asia, in spite of the fact that import prices gained some lost ground this past week, prices continue to remain below the levels reported at the beginning of the month. Most buyers prefer to be sidelined from the market with the expectation of further decreases. Meanwhile, in India, a major domestic producer cut their LDPE prices by INR4000/ton (US$88/ton) and lowered LLDPE prices by INR1000/ton (US$22/ton), according to a distributor. The distributor also commented that the producer is willing to offer retroactive discounts if the fall on PE prices does not stop over the near term. This decrease decision was no surprise to the market players given the thin demand and the downward trend in the region.
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