One more week to May, China’s local PE market has not shown improvement

By the end of March, Chinese suppliers were very hopeful for better purchasing activities in April in light of the start of the manufacturing season. However, it does not appear that the market is moving in favour of the suppliers given the persistently bloated inventories levels that discourage buyers from larger purchases.

Prices for most PE film grades have been moving lower since the beginning of the month as a result, especially for LLDPE film, which witnesses the steepest decline.

Data from CommoPlast Price Index suggests that compared to the beginning of March 2019, the average local HDPE film based on EXW China, including VAT has fallen CNY320/ton ($48/ton) while LLDPE film plunged CNY357/ton ($53/ton). Limited supply condition capped the drop in LDPE film prices, but the market is losing steam, too. 

Slower than expected inventories digestion rate is blamed for the constant weakening sentiment in the local ground. At the time this report is published, total inventories at Sinopec and CNPC’s warehouses stand at 915,000 tons, about 8% above the same period last year. 

A number of players have brought up the concern that the downtrend could persist in the coming days if the pre-holiday replenishment activities do not pick up. China will be off from 1-4 May for the Labor Day holiday. The stock is expected to rise 120,000 tons during this period.

A trader explained, “Our customers are very cautious about making large purchases. Most continue to buy hand-to-mouth basis, as they believe that supply is there to stay in the near term.” The source added the plan to offer additional discount in the coming days to deplete inventories before the holiday.

The downtrend in the domestic ground is expected to exert downward pressure on the import front – where prices have been firm due to tight availability following a series of shutdown in recent days.