Stagnant Demand leaves Chinese LDPE film Traders in a Fix

Singapore 11th May 22: The uncertainty surrounding the impact of the pandemic on the global commodity markets has been the primary concern among the Asian plastics producers and traders for quite some time now. Saudi Aramco had just yesterday decided to cut the crude oil prices to adjust to the ongoing market demand fundamentals, which have been weak for the last month and a half due to continued lockdowns and supply chain disruptions in the Asia Pacific region.

The triple threat of diffusing feedstock cost pressure, stagnant Demand, and disruption in global supply chains have left the LDPE market players in a fix. Import delays of shipments from South Korea, India, and the US have forced downstream extruders to re-strategize their production throughputs for the quarter ending June. Although spot trade picked up in the first week of March following a sudden surge in crude oil prices, prompting downstream buyers to secure their inventories for the short term, producers are likely to roll over prices for the month of May with the latest decision by Aramco possibly causing a reduction in feedstock monomer import prices from South Korea.

Although Demand from the domestic packaging industry has been strong during the lockdown period, as mentioned by one very significant extruder from the Dalian region, disruption in logistics networks caused by the lockdowns has dismantled the functional demand-supply equilibrium temporarily across different provinces. Major extrusion hubs like Guangdong and Liaoning have found it difficult to move their product to drought-ridden markets in the Northwest. The spot market has seen relative stability, and the prices for the current week have been assessed at negligible change week on week. A downward trajectory is expected by the end of the week ending 13th May.

ChemAnalyst predicts the prices of LDPE film to be lower on average in May owing to the latest revision in crude oil prices by Aramco and the weak demand situation in the Asia Pacific region. While the WTI and Brent Indices have yet to show any considerable slip in their daily traded values, even by the most conservative estimates, any aggravation of feedstock cost pressure will be offset by the weak demand fundamentals currently pervading the Chinese commodity markets.