Trade war weakens China PE

China’s domestic polyethylene (PE) prices may weaken in the near term because of ample supply and demand uncertainties amid the country’s trade war with the US.

On 12 September, linear low density polyethylene (LLDPE) prices in south China were assessed at yuan (CNY) 9,550/tonne ($1,390/tonne) EXWH (ex-warehouse), down by 2.3% from 10 August, ICIS data showed. High density polyethylene (HDPE) injection prices fell to their lowest in more than five months at CNY10,000/tonne EXWH south China, down by 5.7% from 16 August, according to the data.

Since mid-August, the combined polyethylene (PE) and polypropylene (PP) inventories of state-owned petrochemical giants Sinopec and PetroChina stood at more than 700,000 tonnes per day, which were above the comfortable level, according to ICIS data.

Consequently, they are cutting offers to offload stocks. Sinopec offered on 12 September HDPE injection cargoes at CNY9,950/tonne EXWH, down by CNY950/tonne from 16 August.

“HDPE prices have been higher than other PE grades from the second half of 2017. As a result, refineries switched to produce HDPE for better profits. And more coal-based plants produced HDPE instead of LLDPE. More supply dampened the HDPE market,” a producer said.

Spot prices in some regions were lower than the settlement prices announced by Sinopec and PetroChina, especially for HDPE grades.

“We had to offer discounts to arouse downstream buying interest,” a south China-based trader said, citing current strong pressure to destock.

Some plants restarted after planned maintenance in September. Meanwhile, Yanchang Petroleum Yan An Energy and Chemical’s 450,000 tonne/year HDPE unit in Shaanxi province is expected to start up soon following a successful trial run.

China’s imports of high density polyethylene (HDPE), linear low density PE (LLDPE) and polypropylene (PP) products from the US were hit by additional 25% tariffs implemented on 23 August. After the date, US cargoes have been rarely spotted in the Chinese market, while more cargoes from other countries arrive amid an open arbitrage window to China.

September and October are traditionally peak months for demand from the agricultural and packaging film sector. But the ongoing trade war between the US and China has dampened sentiment in downstream markets.