Price reduction observed in import PE offers to China

After nearly two weeks of persistent sluggish buying interest, which resulted in rapid inventories accumulation among domestic traders, offers for import PE to China today started to soften, as suppliers attempt to reduce stock on hand.

A trader sold Saudi Arabia’s LLDPE film at $1180/ton CFR China, LC AS term, down $20/ton from earlier this week said, “We are running out of warehouse space while buyers are still reluctant to make purchases. Therefore, we decided to lower our offers despite the high ethylene costs with the main aim to test the acceptance levels.”

Another traders slashed price for Middle Eastern LDPE film by $55/ton compared to last week to close deal at $1300/ton CFR China, LC AS term. The source added, “We have been holding firm on our cargoes for two weeks given lack of supply from international suppliers and strong upstream costs; yet unable to conclude any deals. LDPE film supply in domestic market might be eased in the coming days with the recent cargoes arrivals.”

Player believed that falling futures market played an important role leading to discounts in spot market. In fact, May delivery contract for LLDPE on Dalian Commodity Exchange felt nearly 10% in the past two trading sessions, dampening market confident in near term outlook. A market source commented, “The deterioration in futures trade has also narrowed the price gap with spot market, which means the arbitrage window of opportunity is now shut.” Translating this into demand would mean traders, who were active in channeling cargoes between the two trading grounds, might temporary suspend their activities till the margins become positive again.

However, it is believed that spot market traders would not commit to large reduction considering the current international supply condition and the upstream cots; but merely checking buyer’s respond to the discounts.