For the Quarter Ending March 2022
Spot LDPE film trade volumes in the first quarter of 2022 improved significantly as compared to the last quarter of 2021. The first half of January saw demand struggle to take off owing to the pandemic disrupting market signals in both the domestic and overseas (Northeast Asia) markets. Demand however rose and spot volumes improved by the tail end of January. Feedstock ethylene prices were relatively soft compared to the other regions in the months of February and March as Ethane prices were lower on the back of moderate natural gas price rise compared to the naphtha cracking regions such as Europe and Asia Pacific and the middle east which had to bear the brunt of exceedingly high crude oil prices.
LDPE market in the Asia Pacific remained bullish during the quarter ending March as prices of the resin were heading for record highs by the mid-March period in all the major markets including China and India. Feedstock ethylene monomer prices in the Northeast Asian region increased by 3.2% during the period 25th February 22 to 17th March 22 and the corresponding increase in the Southeast Asian region was 5.6%. Most naphtha crackers in the East Asian region cut down production due to higher cost pressure from the feedstock market.
Major Indian manufacturers including Reliance Industries Limited, ONGC Petro additions Limited and the Haldia Petrochemicals had consistently revised their offers upwards between the period 19th January 22 to 10th March 22.
European LDPE film market witnessed severe supply side crunch through out the quarter ending March 2022. Supply tightness in the natural gas market led to higher utility costs for both upstream naphtha crackers as well as manufacturers of the resin. The prices of Ethylene monomer assessed on an FD Northwest Europe basis have seen a rise of 32% during the period 25th February to 16th March prompting refiners to cut down production rates. LyondellBasell, INEOS and ExxonMobil were see being more aggressive in pricing their offers especially for the month of March which saw an average price push of USD 0.08/lb to USD 0.1/lb on an average.
For the Quarter Ending December 2021
As a result of supply tightness faced during the period post deep freeze in USA, exports had been diverted form Northeast Asia to Europe and the domestic market as a conscious decision to maintain stability in the market. However, production had recovered by the start or mid-October flooding the domestic market with a surplus. Although traders were helped by the continuously rising freight charges which weakened the arbitrage margins for imports from overseas, the slump in demand ahead of the Christmas season in North America and Europe forced most traders to sell their stocks at significant discounts. Demand from the packaging Industry gave the markets some breathing room but the return of strict lock downs and quarantine protocols in China and Northeast Asia had led to ExxonMobil, Dow, LyondellBasell etc., to revise their prices downward drastically to the tail end of December FY21 owing to a lack of demand from overseas.
The outlook for Q1 of FY22 remains highly unpredictable due to the pandemic disrupting logistic networks once again. Although the affect on polymers market may not be as severe as during the Q1 of 2020 period but demand fundamentals could certainly be weakened as result of the ongoing crisis. Demand is expected to pick up during the early to mid-February when markets, especially those in Asia become more pandemic ready.
The Asian LDPE market witnessed an opposite of the trend from North America as prices of LDPE on an average increased in Q4 from the Q3 levels as prices of film grade LDPE in China increased by almost 10%. Supply side tightness persisted during Q4 as freight costs from Europe, U.S.A and the Middle East to East Asia during the October to November period were at record levels. China was also crippled by an energy crisis since October owing to coal shortage which forced the government to cause an intervention and ration the coal supplies to distribution companies. However, this intervention could not lead to any long-term gains as the month of December saw the country hit by the new wave of pandemic disrupting domestic production as well as imports from overseas due to clogging at the container terminals.
India too saw a significant rise in the average prices of LDPE compared to the Q3 levels. A significant increase of 15% was observed during Q4 assessments for the LDPE adhesive film grade. India too was hit by shortages in coal reserve during the same period pushing up the energy costs. Although RIL, Opal and GAIL had started revising prices downward during the month December, the price cut did not affect the overall sentiment for Q4 as Demand had outmatched supply over the entire quarter.
The Outlook for Q1 of FY22 remains mixed with the new wave of pandemic likely to affect production rates across Asia. As a result, prices could see an uptrend by the mid-January to early February period.
European LDPE market too like the US market saw a marginal depreciation in the prices of LDPE during Q4 of FY21 compared to the Q3 levels. The average prices of LDPE film grade were on an average 2.3% lower over Q4 compared to Q3 assessed on an FD Hamburg basis. Demand declined since the closing week of November FY21 as the holiday season saw most companies including INEOS and LyondellBasell revise their prices downward. Natural gas market’s anomalous trend this time around had a direct impact on the production levels as price was on a downtrend for majority of Q4 and only started reversing by the second week of December. This had led to the exporting countries like the Netherlands and Belgium continue with the same production levels. The new wave of pandemic however impacted their export base as East Asia went back to lock down mode during the closing weeks of Q4 further reducing the prices of LDPE.
The Outlook for Q1 of FY22 remains uncertain as the new wave of pandemic disrupts market signals and global logistic networks making it difficult for market players to assess actual demand. A lot, however, depends on the severity of the winter in Europe and US as production levels come down during the peak winter season owing to increased energy demand and in turn the energy costs.
For the Quarter Ending September 2021
During the third quarter of 2021, polymer availability improved significantly in the domestic market which resulted in a marginal decline in the prices of LDPE in North America. The demand from downstream sectors stayed healthy in Q3 as market participants pointed out that consumption for the product has turned stronger. The change in consumer behaviour was observed by the manufacturing sector after considerable ease in restrictions was seen across the US. In terms of demand, the construction sector along with the packaging sector had been intaking healthy volumes throughout the quarter. The supply of LDPE improved in the last few weeks of the 3rd quarter as operating rates from the manufacturers measured robust increase. The price of LDPE Film Grade was last assessed at USD 1850/MT FOB Texas.
The domestic LDPE market price experienced an uptrend in the Asia Pacific region in Q3 2021. The pricing trend witnessed another uptick w.e.f. 24th August buoyed by the consistent rise in the consumer demand amidst constrained regional supply. Shutdown by two polymer producers based in Malaysia during the quarter also levied stress over the regional supply fundamentals in the domestic market. A trader revealed that an increase in the delta variant cases disrupted the supply chain with various countries in Q3 and has thus made prices volatile. In India, the demand for LDPE remained bullish throughout the quarter as prices escalated from USD 1090/MT to USD 1206/MT during the quarter.
The European market of LDPE showcased mixed sentiments in the third quarter. Production was improved in Q3 due to the maintenance of the several plants. The prices of PE hit all-time high earlier in 2021 due to the extreme weather conditions in the US Gulf which took out large amounts of ethylene and PE capacity tending to reduce the supply as well as demand. Prices across Europe degraded due to the abrupt market situation and were lastly settled at USD 2055 per metric tonne in September.