By John Richardson
THE notion that Asian polyethylene (PE) markets would soon bottom out, which was widely expressed at the Asia Petrochemical Industry Conference (APIC) last month, seems to have been discredited.
There was a slight recovery for the week ending 1 June, when prices had crept up by $10-20/tonne on improved confidence amongst traders, according to ICIS.
Confidence was boosted by the belief that China would launch a huge new economic stimulus package.
"But then, everyone began to realise that economic stimulus would not be on the same scale as in 2008," said a Singapore-based polyolefins trader.
Even last Thursday's decision by China to cut interest rates by 25 basis points failed to lift the renewed negative sentiment. As a result, pricing for the week ending 8 June was assessed $10-50/tonne lower by ICIS.
Volumes are substantially down because few end-users want to commit to anything more than hand-to-mouth purchases, until or unless macroeconomic and political uncertainties are resolved. In thinly traded markets, pricing tends to bounce around, and so a few more mini recoveries, followed by further declines, seem likely.
This is not a "business as usual" scenario, as some major Asian producers insisted was the case during APIC. China's buyers haven't just tactically retreated until pricing has bottomed out.
Instead, we face the biggest crisis since 2008, which was further underlined by the release of weak economic data by China over the weekend.