Local LDPE film market firms up, but Chinese players remain wary about outlook

Domestic LDPE film market in China has witnessed some increases over the past week thanks to healthy pre-holiday replenishment activities. However, it appears that the recent uptick is not strong enough to assure confidence among market players, who has been pessimistic about this grade.   

“The current price levels are not too far from the lowest point of the year recorded during the first week of July and the second week of September. Supply remains the stone to the balloon and therefore, we are not very bullish about the post-holiday outlook,” a market source said.

Major local producers including Sinopec Shanghai, Shenhua Xinjiang and PetroChina Daqing have already resumed regular production after completing the annual turnaround earlier this month. The three plants have a combined capacity of 670,000 tons/year. 

In the latest warehouse survey in Shanghai, Ningbo, Shandong and Qingdao areas, most warehouses are still carrying 55-60 percent of PE, of which a majority is LDPE grade. “We have 5000 tons Iranian LDPE film cargoes would arrive Shanghai right after the National Day holiday. These cargoes were delayed previously,” a trader reported.

“Supply for LDPE film is more comfortable than other grades. Strong upstream costs, resilient energy complex and depreciated local currency might not be enough to pull prices significantly higher. We have to see the state of demand in the post-holiday term,” another market source added.

At the moment, agricultural film sector in Northern China is still juggling the strict environmental regulations, which limit operating rate at many small to medium size manufacturers, who in need for machinery and equipment upgrade. Meanwhile, modern plants are at the full rate. 

Demand becomes the main factor that determines the price trend in the post-holiday term, now that supply is comfortable. Buyers fear that market would slip to the previous low would purchasing interest remain sluggish.