Malaysia domestic PE market subdued despite lower July offers

SINGAPORE (ICIS)–Trades in Malaysia’s domestic polyethylene (PE) market remain subdued despite lower offers due to uncertainty being generated by the US-China trade tensions.

Market sentiment remains bearish as demand for end-products has yet to pick up and as converters continue to keep their inventory tight, while domestic supply is expected to lengthen in the second half.

Polyethylene is used in plastics bags. (Photo by Elaine Thompson/AP/Shutterstock)

A major domestic producer on Wednesday cut offers for July-delivery cargoes by Malaysian ringgit (M$) 300-380/tonne from June, depending on PE grades.

Offers for low density polyethylene (LDPE) film and high density polyethylene (HDPE) film grade offers were reduced to M$4,550/tonne and M$4,460/tonne DEL Malaysia, respectively; while those for linear low density polyethylene (LLDPE) film were at M$4,300/tonne.

Demand has not improved after in June after the Eid-ul Fitr holiday, which marks the end of the Muslim fasting month of Ramadan.

Some converters were running their manufacturing units at reduced rates because of weak downstream demand due to slow consumption of finished goods amid uncertainty in the global geopolitical and macroeconomic conditions.

Most buyers were not keen to discuss any trade and were opting to wait for another local producer to announce offers next week before deciding on their purchase.

In addition, local supply is expected to lengthen substantially as PETRONAS’ Refinery and Petrochemical Integrated Development (RAPID) complex is on track to start commercial operation by the end of the year.

The company’s downstream plants include a 350,000 tonne/year LLDPE unit and a 400,000 tonne/year HDPE unit.

Overall market sentiment is being dampened by the prolonged US-China trade war, but hopes of a resolution is being buoyed up by an impending meeting between their leaders at the G20 summit on 28-29 June in Osaka, Japan.

Buyers may be encouraged to re-stock in the near term as market confidence improves.

US President Donald Trump and China President Xi Jinping are expected to hold a meeting on 29 June to resolve their trade war, which will hit its first year on 6 July.

Focus article by Felita Widjaja

($1 = M$4.14)

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