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China PE market consolidates at highs supported by strong overseas market

2021-03-22 08:30:40 CCFGroup

After the Spring Festival holiday, China domestic PE market rushes up as a whole. Taking LLDPE as an example, LLDPE jumps directly from around 8,200yuan/mt before the holiday to around 8,800yuan/mt after the festival, and then fluctuates higher to around 9,000-9,200yuan/mt. At present, market mindset is mixed. PE CFR China market is strong, and China domestic market is consolidated at highs.

As for LLDPE, the average price of the RMB market in East China is basically around 9,200yuan/mt, and Sabic LLDPE 218WJ are offered at around 9,450yuan/mt, while the LLDPE is basically offered at around $1,200-1,240/mt in the overseas market, and the Sabic LLDPE 218WJ are offered at above $1,250/mt. The price spread between China domestic market and the PE CFR China market is at around 500-600yuan/mt.



Normally, the price spread is within 200yuan/mt, and trading activity in China domestic market and PE CFR China market is relatively balanced. However, as the price spread is relatively wide, downstream buyers prefer to purchase yuan-denominated materials and get the tax refunded, and demand for the PE CFR China market cargoes declines sharply. Moreover, China domestic supply is ample, and the competitiveness of the overseas market has declined sharply.



However, PE CFR China market keeps strong, and may continue to move higher. Taking LLDPE as an example, the current prices in Northwestern Europe and Houston are far higher than those in the far East and the Middle East, as large quantities of petrochemical plants in the United States closed due to the cold weather, such as ExxonMobil, Formosa Plastics USA, Dow Chemical, Chevron, etc., which results in a very significant reduction in PE production. Meanwhile, due to the shutdown of American plants, its exports to other countries and regions have decreased, and many contracts and orders conducted previously have been reduced or postponed due to this force majeure, especially the European and Chinese markets.

In addition, during the Spring Festival in China, some plants in the Middle East market shut for short maintenance, and some of the goods has transported to Europe, resulting in a further reduction in the number of goods transporting to the Chinese market.

Therefore, judging from the above situations, the overall supply of goods from foreign petrochemical plants to China is significantly lower than that in the previous period, coupled with the high prices in Europe and the United States, most foreign suppliers offer higher. Under the circumstances that the PE CFR China market price continues to strengthen and it is difficult to have downward expectations, China domestic market price continues to fluctuate at a high level. Basically, it will not have a new direction until the follow-up supply of goods in North America and the Middle East recovers or domestic plants such as Huatai Shengfu and Zhejiang Petrochemical II are put into production one after another.

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