Asia MLLDPE may extend decline on crude falls, weak demand

Focus story by Jasmine Khoo

SINGAPORE (ICIS)–Spot prices of metallocene linear low density polyethylene (MLLDPE) in Asia are expected to slip further throughout October, to track the hefty falls in upstream crude values amid an oversupplied market, market players said on Thursday.

On 8 October, MLLDPE spot prices were assessed at $1,665/tonne CFR (cost and freight) China, down by 6.7% from 6 August, according to ICIS data.

Spot market trades were hampered in the first week of the month as China was on National Day holiday from 1-7 October.

During the week-long holiday, most buyers decided to keep their inventories lean as they were wary of potential losses amid continued weakening in crude prices.

At midday, US crude was trading at $87.63/bbl, while Brent crude was at $91.56/bbl.

“Most (MLLDPE) buyers are being very cautious now. Earlier before the holidays, they were able to accept the October offers [from a major regional supplier] at $1,670/tonne CFR China, a China-based distributor said in Mandarin.

“However, when everyone got back from the holidays and saw that crude has fallen so much, buying ideas for C6 MLLDPE also softened in tandem. Right now, they are already looking to buy at $1,650-1,660/tonne CFR China,” the distributor said.

A separate China distributor echoed the same concern over the near-term outlook of the MLLDPE market.

“As a distributor, I am also not too confident of taking too much material, as demand seems very weak and there is no telling if upstream prices might go down further,” the distributor said.

In southeast Asia, regional sellers have been trying to boost buying interest though lowering their offers.

Offers for October-loading non-dutiable cargoes declined by around $30/tonne from late September to $1,720/tonne CFR SE Asia for the week ended 8 October.

However, buying interest remained muted, with overall trades in the region subdued.

“Demand from downstream MLLDPE users is very limited, and crude prices have fallen so much. Supply is also not an issue,” a southeast Asian buyer said.

“For us to import October cargoes, prices would have to be $1,700/tonne CFR SE Asia and below,” the buyer added.

MLLDPE is used in the manufacture of stretch film.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections