China domestic PE prices seen stable amid tepid demand

SINGAPORE (ICIS)–China’s domestic polyethylene (PE) prices are expected to be largely stable for the rest of November amid sluggish demand from downstream industries, despite tight supply of some product grades.

Prices of low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) may stabilise after more than a week of declines.

On 22 November, LDPE prices in east China were assessed at yuan (CNY) 10,600/tonne ($1,604/tonne) ex-tank, down by CNY50/tonne from 10 November, while LLDPE prices shed CNY50/tonne over the same period to CNY9,800/tonne ex-tank, according to ICIS data.

Producers and traders are keen to maintain their offers as they are not under any pressure to get rid of existing inventory.

Domestic supply of the LDPE and LLDPE grades has increased as three plants have resumed operations in the first half of November, with two others coming back on stream at the end of the month.

Additional supply will also hit the market with the expected start-up of Shenhua Ningxia Coal Industry’s new 450,000 tonne/year HDPE/LLDPE swing plant in end-November.

Spot prices might find some support from the robust futures market, where prices have been rising since 17 November.

On 22 November, January 2018 LLDPE futures, the most actively traded contract at the Dalian Commodity Exchange (DCE), closed at CNY9,825/tonne, up by CNY65/tonne from the previous settlement.

In the spot high-density polyethylene (HDPE) market, the price uptrend may take a pause after hitting a near three-year high on the back of limited spot supply.

On Wednesday, spot HDPE blow moulding (BM) prices in east China were assessed at CNY11,300/tonne ex-tank, up by CNY100/tonne from 10 November; while HDPE film prices increased by CNY250/tonne over the same period to CNY11,850/tonne ex-tank, ICIS data showed.

Shanghai SECCO Petrochemical is running its 300,000 tonne/year HDPE unit low rates following a week-long shutdown from 12 November due to a technical glitch.

Sinopec Maoming Petrochemical, on the other hand, was unable to produce HDPE BM in early to mid-November because of catalyst issues, while PetroChina and CNOOC and Shell Petrochemicals decided not to produce for HDPE BM production this month.

Downstream users of HDPE, however, were resisting higher prices citing shrinking margins, resulting in lack of trades.

Moreover, demand for all grades of PE was tepid as the peak demand season for agricultural films and packaging has ended.

In December, there were concerns that supply will shrink as some producers may have to cut or suspend production in response to the Chinese government’s measures to address the typical spike in pollution levels during winter.

Focus article by Lucy Shuai

($1 = CNY6.61)

Picture: Polyethylene (PE) is used in plastic bags. (Photographer: Jeff Blackler/REX/Shutterstock)

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