Imported PE market extends weakness in the short run

Recently, PE CFR China market is in weak consolidation, among which LLDPE market drops significantly. The price fluctuations of LDPE and HDPE film are relatively small, but there are signs of a slight downturn recently. On Jun 25, prevailing offers for LLDPE (MFR: 2) were at $910-940/mt, LDPE (MFR: 2, with anti-blocking agent) offers at $920-940/mt, HDPE film at around $920-1000/mt, and HDPE blow-molding at around $870-950/mt and HDPE injection at around $920-930/mt, load in Jun-Jul, CFR China main ports.

Regarding the future development of the imported PE market, it is believed that the short-term market outlook is not optimistic, with mostly bearish news and short-term weakness that is difficult to overcome.

Firstly, the prices of ethylene monomer have declined.

Since April, the price of ethylene monomer has been declining, which has suppressed the price of PE from the cost side. Although most domestic and foreign plants are mainly integrated, the profit margin of petrochemical plants selling monomers directly has been squeezed due to the decline in the price of ethylene monomer. The situation of exporting ethylene has clearly decreased, and in order to balance the profit of their entire industry chain, some factories have increased the operating rate of PE plants, which has increased the overall supply of PE and to a certain extent suppressed the imported PE market price.

Secondly, there has been a continuous depreciation of the RMB.

Since April, the exchange rate of the Chinese yuan has been continuously depreciating, breaking through 7 in mid-May and currently approaching around 7.2, with a large fluctuation. Taking LLDPE as an example, the price spread between the domestic and foreign markets is currently controlled at around 100-150yuan/mt. If the imported PE market price remains high, the price spread will be enlarged and the USD-dominated goods will have no price advantage. Therefore, some traders have slightly lowered their prices to balance the price spread between the RMB market and CFR China markets in order to promote the transaction of USD-dominated goods. 

Thirdly, RMB market has continued to fluctuate.

 Currently, in the domestic market, the overall operating rate is low. In terms of demand, downstream operating rates and procurement pace are both at low levels. The demand for agricultural films and other products are also in a slack season, so RMB market continues to fluctuate. In the short term, this fluctuation pattern is difficult to change and will only slightly affect the imported PE market. Additionally, coupled with the previously mentioned exchange rate and balancing the price spread between the RMB market and CFR China market, CFR China market is expected to continue to be weak.

Overall, the current imported PE market is impacted by the factors of low raw material costs, exchange rate, and balanced RMB and CFR China market price spread. In addition, suppliers have also slowly lowered their new offers' price. The slowdown in demand is not only applicable to the RMB market cargoes but also to imported market. As a result, the short-term market will continue to be weak.