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Domestic PE market in China has been on the downtrend since late October 2018 and three months into 2019, prices are now at the lowest levels since 2017. Ample supply, especially for LLDPE film, is blamed for such situation, which also reflected in the comparatively lower price level for this grade.

Obviously, the effect of the ban on the import of plastics scraps that once skyrocket HDPE film market has now diminished, which draws HDPE film prices closer to the other grades. The average price gap between HDPE and LLDPE film is now less than $100/ton, down by half from the peak of the cycle. 

Looking at the supply side, import arrival for LLDPE film to China has surged drastically in 2018, commanding a 45% growth compared to 2017. In the first two months of 2019, the total LLDPE arrival reached 858,500 tons, HDPE at 1,187,700 tons and LDPE at 489,500 tons – much higher than the same period last year. It is important to note that in both 2018 and 2019, the Lunar New Year festival fell into the month of February, however, the impact on the import arrival in 2019 was not as strong as it did in 2018.   

Such a heavy influx of import cargoes coupled with the bloated inventories levels among major local producers has not created a conducive environment for prices to firm up. Daily update on the local inventories is available here.

“Demand from the agricultural film sector has been resilient since Lunar New Year, but it is not enough to digest the inventories in the local ground. We hope to see better market condition in April due to the VAT rate cut and the start of the manufacturing season,” a local trader commented. 

Chinese government has announced that starting 1 April 2019, VAT rate for the manufacturing sector would be reduced to 13% from the current 16%. This would potentially lower the operating costs for companies and stimulate demand. 

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