China’s domestic linear low density polyethylene (LLDPE) prices have fallen to their lowest level in more than 10 years and may remain soft on bearish sentiment.
Weekly LLDPE prices were at yuan (CNY) 8,225/tonne EXWH (ex-warehouse) east China on 10 May, down by 2% from the previous week, ICIS data showed.
Spot prices were last seen at these levels on 28 November 2008, according to the data.
China’s major producers faced high inventory and were under pressure to destock since the Lunar New Year holiday.
The combined polyethylene (PE) and polypropylene (PP) inventories of state-owned petrochemical giants Sinopec and PetroChina on 13 May have risen to 1m tonnes, up by 27% year on year and up 56% from the start of 2019, market sources said.
Domestic production in January-April 2019 were up 3% on year as not many LLDPE units have undergone maintenance compared with the same period last year.
Major producers resorted to cutting offers to offload stocks. Sinopec and PetroChina were offering LLDPE cargoes on Monday at CNY8,050/tonne EXWH, down by CNY150/tonne from 10 May.
“The prices dropped below CNY8,000/tonne, which has been out of our expectation. We don’t know the price direction now,” said a source from Sinopec.
Sufficient supply of LLDPE imports, following a 35% year-on-year surge in Q1 2019 dampened domestic sentiment, sources said.
The downward pressure was aggravated by the recent escalation of the US-China trade war. The US hiked tariffs on $200bn worth of Chinese goods to 25% on 10 May, and China hiked tariffs on $60bn of US exports to 5-25% in response.
“Considering ample supply and bearish sentiment from US-China trade war, the downtrend price may continue,” one trader had commented. ■