Why imported PE market keeps falling?

Recently, China domestic PE market has continued to fluctuate, and the PE CFR China market has continued to decline. Taking LLDPE as an example, it has fallen from a high of around $1,225/mt in May to around the current $940/mt. Basically, except for LDPE, the prices of most grades are currently below at $1,000/mt, and the market trading sentiment has also continued to be sluggish.

From the market point of view, this wave of decline is mainly due to the following reasons:

1. New offers from foreign suppliers declines, and the cost has dropped.

Over the past two months, new offers from major suppliers have been falling continuously. Under the collapse of costs, traders offer lower sharply. Judging from the price of a foreign trader in Qatar, the LLDPE price in June has been around $1,120/mt. After two and a half months of decline, the price last week is around $940/mt, with a decline of around 16%. LDPE and HDPE film is basically the same, among which LDPE fall further due to the previous high price.

2. The price spread between RMB market and PE CFR China market narrows.

At the same time, in the early stage, due to the fall of crude oil and the deviation of its own supply and demand side, RMB market has weakened, and the price spread between RMB market and PE CFR China market has been continuously narrowed, which forces the PE CFR China market price to continue to weaken. Taking LLDPE as an example, the current price spread between RMB market and PE CFR China market is basically controlled at around 100-200yuan/mt, which is at a relatively balanced level.

3. Downstream demand is too sluggish.

In terms of downstream demand, the overall demand of the PE CFR China market remains depressed in 2022. In the first half of 2022, due to the influence of high-priced crude oil, the cost remains high. The price spread between RMB market and PE CFR China market has been too large, and downstream demand is weak to follow up. Most traders preferred to purchase yuan-denominated materials, thus further reducing the demand for USD-denominated goods. Since the third quarter, since its own demand is weak (especially mulching film) and the epidemic continues to occur in various places, the overall demand has always been weak. In July-August, due to the hot weather, under the power rationing policy in Jiangsu and Zhejiang, the operating rate is low, and the demand has been further reduced.

From the current market point of view, due to the current low price, traders intend to stock up at low prices, and the overall supply may be expected to increase slightly in the future. As for the demand side, it is about to enter the golden period of September, and the demand across the board is expected to recover. Also, the high temperature has passed, the power rationing will be gradually cancelled, and the downstream operating rate will be expected to gradually rebound. On the whole, the market has limited room for decline in the near future, and it may rebound modestly.