Demand Shrinkage Puts pressure on Low-Density Polyethylene Prices in Asia
- 09-Aug-2022 12:34 PM
- Journalist: Peter Schmidt
Ongoing market disturbances have pressured market dynamics for several commodities, including Low- Density Polyethylene. As per the latest insight, the demand for Low- Density Polyethylene in China has weakened in the last few weeks due to trade disruption following port closures. Also, the geopolitical tensions between Russia and Ukraine have posed new challenges to the global economy, resulting in high inflation and frequent interest rate hikes by central banks, and demand from domestic and overseas consumers has also slumped.
According to the ChemAnalyst database, Low-Density Polyethylene (LDPE) prices were quoted at USD 1635/MT in the week ending 5th August. The primary factor for the price decline is the sluggish demand and plummeting upstream Naphtha prices. Additionally, the continuous trade deficit has supported the price to weaken in the domestic market.
At the same time, in China, packaging and plastic industries have been protracted; thus, the demand for Low-Density Polyethylene remained lacklustre, leading to a straight and steady fall in the product's prices. Hence, Chinese manufacturers don't have any option but to curtail costs to clear inventory and create space for new season output. Moreover, manufacturing activity has plunged, and the PMI has shifted to its lowest level in the last month. Furthermore, supply disruption and price pressure in Vietnam were easing at the beginning of August. Also, the rate of input cost inflation slowed sharply. Hence, as a result, prices of Low-Density Polyethylene have fallen, and the prices offered at USD 1490/MT during the same time frame.
In the meantime, South Korea's manufacturing activity has fallen as output, and new orders weakened. Additionally, a South Korean manufacturer reported that "strong inflationary pressure and persistent supply chain disruption hampered production and demand during the third quarter of 2022." Consequently, prices of Low-density Polyethylene were assessed at USD1415/Tonne with a declination of around 1.0% in the preceding weeks. Similarly, domestic demand remains lacklustre in the Indian market, and the prices are quoted at INR 139679/Tonne during the first week of August.
According to the ChemAnalyst estimation, "the price of Low-Density Polyethylene will follow the upward trend in Asia. Also, the price of the imported cargoes may increase if the upstream crude and Naphtha prices rise. Meanwhile, the demand from the domestic market is likely to inflate, which can trigger the Low-Density of Polyethylene market. Additionally, the freight charges may increase, pushing the Low-Density Polyethylene prices to move forward."