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The Asia ethylene market started going down last Friday, 29 September 2017, right before Chinese buyers enter the long National Day holiday. Prices continue to slip this week, accumulating a total drop of $50-55/ton from mid of last week, casting a heavy shadow on the downstream PE market.

The downtrend in ethylene market is deemed necessary, as prices have been firming up since early July and stretch for approximate three months in a row. At the meantime, most downstream derivatives including polyethylene (PE), MEG and PVC are facing tough time catching up. However, tight availability across the region might prevent market from returning to the previous low in June, players said.

Though import PE offers to both China and Southeast Asia have softened two weeks earlier than ethylene, players are still pressing for additional discounts this week. “Suppliers refused to give any large discount, especially for HDPE film, claiming limited supply. We decided to wait for a while longer as ethylene might continue to fall in the near term,” a regional buyer said.

Another buyer informed, “At the current ethylene costs, non-integrated PE producers are still making huge losses, and hence it is very likely that ethylene might soften further. We do expect import offers for deep seas HDPE and LLDPE film cargoes to breach below the $1200/ton mark. We plan to wait for discounts to emerge.”

On the other hand, suppliers are very cautious about cutting PE offers due to the lack of inventory pressure. There is a very strong sense of optimism in the market that post-holiday demand in China would be healthy, which might prevent any significant plunge. And therefore, a correction in ethylene costs might only result in a small drop in PE prices, players expected.