SE Asia MLLDPE export margins to China healthy; demand remains slow

Author: Leanne Tan


SINGAPORE (ICIS)--Southeast Asia’s metallocene linear low-density polyethylene (MLLDPE) export margins to China remain healthy but sentiment is still weighed down by tepid downstream demand.

Jakarta container port (Photo by Adi Weda/EPA/Shutterstock)

Hexene-based (C6) MLLDPE is trading at a strong premium to commodity linear low density PE (LLDPE) since the second quarter of 2019, with their price spread hovering at around the $300/tonne mark and above since May.

The current minimum spread is double the average of $150/tonne in the previous years, market sources said.

With China having imposed additional tariffs on US exports, US-origin MLLDPE resins have faced increasing difficulty penetrating the Chinese market.

China has little domestic MLLDPE production capabilities of its own and has few other import alternatives. This is why its import prices for southeast Asian-origin cargoes have remained at fairly high levels over the past few months.

For LLDPE, while the additional tariffs have also resulted in a sharp reduction of US-origin exports to China, buyers still have a myriad of alternative sources of supply.

Unlike MLLDPE, heavy volumes of commodity LLDPE are produced domestically in China, which are supplemented by imports from the Middle East and India.

Consequently, import prices of LLDPE in China have come under stronger downward pressure compared with those of MLLDPE.

But southeast Asia’s export sales of MLLDPE cargoes to China have been slow, undermined by the sharp depreciation of the Chinese yuan against the US dollar as a weak currency makes imports more expensive.

Southeast Asian suppliers cut offers for C6 MLLDPE resins by $50/tonne week on week to $1,140/tonne CFR (cost & freight) CMP (China Main Port) in the face of tepid demand.

Some traders and distributors have cut import volumes, given lack of profitability associated with re-selling in China’s domestic market under current conditions.

Moreover, downstream demand for finished goods has taken a beating from volatile global macroeconomic conditions, further weighing on confidence levels in the import market.

Focus article by Leanne Tan

Click here to view related stories and content on the US-China trade war topic page.