Global LDPE Prices Slide Amid Weak Demand, Geopolitical Tensions, and Year-End Destocking

The global Low-Density Polyethylene (LDPE) market experienced a decline this week, primarily driven by subdued demand from key downstream sectors, including construction, packaging, and agriculture. In Europe, easing feedstock Ethylene prices reduced production cost pressures, further contributing to the downward trend. Conversely, in Asia, despite rising Ethylene costs, LDPE prices followed a declining trajectory, shaped largely by weak demand. Geopolitical tensions, and uncertainty surrounding potential US tariffs on Chinese goods added to market volatility and dampened sentiment during the last week of November. These factors collectively exerted pressure on LDPE prices, emphasizing the market's sensitivity to both demand fluctuations and broader economic and geopolitical developments.

In the European market, LDPE prices continued their downward trend, with LDPE Film Grade FD Hamburg declining by 1.7% during the week ending November 29, 2024. Weak demand and abundant supplies weighed on market sentiment, aligning with broader trends in the LDPE sector. While prices saw a slight drop, market fundamentals remained largely unchanged as year-end buying slowed, with converters maintaining minimal inventories ahead of December holiday shutdowns. Domestic supplies were adequate to fulfill demand, reducing interest in imported cargoes. Additionally, logistical disruptions in northern Germany further impacted the market. A storm on November 27 caused significant rail network issues, including fallen trees and damaged overhead lines, leading to congestion and restricted access to major seaports. These temporary setbacks exacerbated cautious sentiment among market participants and could influence regional market dynamics in the near term.

Further, Chinese LDPE prices for Adhesive Film grade CFR Shanghai dropped by 0.7% last week, driven by weak downstream demand and low import activity. Geopolitical tensions, particularly the Russia-Ukraine conflict, pushed global oil prices higher, negatively impacting China's LDPE import market sentiment. As the Chinese New Year approaches, freight rates have risen due to increased demand and limited capacity from carriers imposing blank sailings. This has tightened capacity on Asia-Europe routes and worsened the supply-demand imbalance. With increasing volumes ahead of the holiday shutdown, supply chains are expected to face more pressure in the coming weeks. Regional LDPE consumption has weakened, adding to the downward price pressure. Surplus supplies for LDPE from the Middle East and US have further lengthened the market, leading producers to consider plant shutdowns or price reductions to counter margin losses, while converters avoid inventory buildup.

As per ChemAnalyst, the global LDPE market is expected to continue its downward price trend through December 2024, primarily driven by year-end destocking efforts, as producers and traders focus on reducing inventories. Furthermore, feedstock costs, particularly Ethylene, are anticipated to play a significant role in shaping production costs. A potential decrease in Ethylene prices could contribute to lower overall LDPE production costs, reinforcing the ongoing decline in market prices.