Will demand be strong enough to support higher PE prices in Asia?

PE prices have moved higher in major Asian markets during the first week of the new year, with sellers pointing to firm upstream costs as well as improved demand as support for their price increases, as per Chemorbis. However, most buying interest has been from traders and distributors this week while converters have generally remained on the sidelines, as they plan to watch market developments for a while longer before taking positions. Most converters plan to wait until the second half of the month to make their purchases as they are not confident about the demand outlook for their end products. While converters remain reluctant to purchase, demand has nevertheless picked up this week as traders and distributors have been more active in the market, with most producers saying that they have been receiving a greater number of price inquiries this week despite no uptake in sales. In China, PE prices in both the import market and the local market moved higher this week. Import offers posted week-over-week increases of US$10-50/ton as two majors announced new LLDPE film offers with increases of US$50-95/ton when compared with their most recent offer levels, as traders also lifted offers to the Chinese market. Most traders added that they are unwilling to conclude deals in large quantities these days in anticipation that prices will continue to gain ground over the short term. Inside China, offers for domestic material posted week-over-week gains of CNY100-200/ton (US$15-30/ton) for HDPE film, CNY250-350/ton (US$38-53/ton) for LLDPE film and CNY400/ton (US$61/ton) for LDPE film. Major domestic producers CNPC and Sinopec raised their offers by CNY100-550/ton (US$15-83/ton) this week, citing their lack of inventory pressure along with higher LLDPE futures market prices as support for their price increases. In Southeast Asia, import offers rebounded after losing some ground in the last week of 2010, with offers for import HDPE film rising US$30-50/ton on the week while offers for LLDPE film posted relatively larger increases of US$50-80/ton. A major Middle Eastern producer raised their offers to the region by US$70/ton for HDPE film and by US$40/ton for LLDPE film when compared with the past month. Distributors in Vietnam and the Philippines announced significant increases of US$36-201/ton on offers this week in response to rising import prices, although producers in Indonesia and Malaysia announced January offers with rollovers or even decreases of up to MYR90/ton (US$29/ton) from December. Buying interest is said to be healthier in the region's import market while trading activity in local markets remained lackluster in the first week of the new year. PE prices also began the new year with increases in the Indian market. Traders active in India reported that demand has picked up in the first week of 2011 and the local supplies have grown tighter recently on rumors that a major Indian producer managed to conclude some export deals in significant quantities last week. A trader who received an offer for Middle Eastern HDPE film earlier in the week with increases of US$20/ton when compared with the most recent offers they received for this origin stated that their supplier has already sold out at their new price levels and that this material is no longer available. In the local market, a distributor said that they lifted their offers for locally-held Central Asian LDPE film by INR2000/ton (US$44/ton) this week. However, one trader commented that they are not planning to make any fresh purchases from the import market for now as they do not believe that demand is strong enough to support the current price levels.