Imported PE market review in H1 2023

In the first half of 2023, the imported PE market rose first and then declined. The period of increase was relatively short-lived, while the decline lasted for a longer duration.

In January, PE market mainly moved up. At the beginning of the year, market sentiment was relatively stable, and the market was in strong wait-and-see stance. However, due to the appreciation of the RMB, imported PE market had been supported and most traders offered higher slightly. Then, suppliers had published their new offers at higher price, and the overall imported PE market went up. Subsequently, with the approach of the Spring Festival holiday, transaction was thin.

In February, the market was mainly in consolidation. After the holiday, imported PE market inched up under the influence of RMB futures-spot market, and market transaction for high-price materials was poor. Most buyers bid with low price and traded price was relatively low.

In early March, imported PE market had been supported by the strong RMB futures-spot market and appreciated RMB. However, from March to May, RMB market sentiment was weak, resulting in noticeable pressure on the imported PE market. In addition, suppliers published their new offers at lower price, leading to overall price declines as traders faced cost pressures. The downward trend became more pronounced in May, as prices fell below the levels at the beginning of the year. Factors such as costs, fundamentals, and market sentiment all contributed to a comprehensive downward trend.

In the first half of Jun, imported PE market edged up as RMB futures-spot market rose up. The market sentiment had been at a low point after several months of continuous decline, leading to a minor rebound in imported PE prices. However, in mid-June, RMB started to depreciate continuously, transaction for high-price goods was poor. Most traders offered lower to balance the price spread between RMB market and CFR China market and make transactions. However, downstream demand remained weak, resulting in a strong wait-and-see stance.

Based on the market highlights, imported PE market in the first half of 2023 exhibited several characteristics:

1. The overall import volume decreased slightly, and the supply was relatively stable.

According to the China Customs, China's total PE imports from January to June 2023 amounted to 6.3243 million tons, a slight decrease of 3.7% year-on-year. The decline in import is mainly due to the intensive startup of new plants and imported materials had been squeezed. As a result, the market has gradually softened, leading to decreased cost pressures for traders. Despite the low-price procurement sentiments, the competitiveness of imported materials is not as strong as in previous years. For suppliers, the imported PE market lacked advantages. Moreover, China domestic price was weak, which was a significant factor contributing to the overall decrease in imports.

2. The impact of the RMB exchange rate on the imported PE market continues and the influence has expanded.

It is evident that the exchange rate and imported PE market are inversely correlated. Taking LLDPE as an example, at the beginning of the year, due to the appreciation of the RMB, most traders offered higher. However, when RMB depreciated significantly, market transaction for high-price USD-dominated goods was poor and traders offered lower to balance the price spread between RMB market and CFR China market and make transactions. The price trend of LDPE and HDPE was similar.

3. Imported PE prices plunged from the highest level.

LDPE prices were at the highest in the first half of the 2023, $100/mt higher than LLDPE and HDPE. However, by the end of June, although LDPE prices were slightly higher than LLDPE, the price spread had significantly narrowed to around $10-20/mt or even lower, with LDPE prices below HDPE film prices. This is mainly due to LDPE prices remaining high since mid-2020, significantly deviating from LLDPE and HDPE prices, and now LDPE price returns to the normal level to balance the market.