LLDPE Faces Divergent Trend as Europe and US Markets Dwindle with Asia Sustaines Stability

In the past week, there were diverse developments in the global market for Linear Low-density Polyethylene (LLDPE) as the prices witnessed a decline in major regions like the US and Europe, while the Asian market remained relatively steady. Several factors contributed to this downward trend, including weakened demand and an oversupply of LLDPE on a global scale. Furthermore, reduced production costs were observed due to the decreased prices of key raw materials such as Ethylene, Naphtha, and Crude oil. Geopolitical tensions also played a role, disrupting supply chains and elevating freight rates. Consequently, prices for LLDPE Film grade in Europe (FD Hamburg, Germany) decreased by 2%, and US LLDPE Film Butene-based grade prices (FOB Texas) dropped by 3%, with the Asian LLDPE market maintaining stability throughout the week ending on May 24, 2024.

In Europe, the LLDPE market saw limited trading activity and subdued demand over the past week. Increased supply and a rise in offers for imported materials led to a decline in spot prices as trading remained sluggish, with buyers expecting prices to decrease in June. The market continues to be well-supplied, with participants having minimal expectations for a near-term recovery in demand or a tightening of supply. Despite the upward trend in feedstock Ethylene prices, weak demand from downstream sectors such as construction, packaging, and automotive industries kept LLDPE prices restrained. Moreover, the market was affected by heightened ocean freight demand from Asia, suggesting a potential start of restocking in Europe. Furthermore, North American importers rushed to meet peak season demand amid concerns about labor issues or disruptions in the Red Sea later in the year, further straining the container market. This strain was exacerbated by the redirection of shipments from the Red Sea.

In the US, LLDPE prices experienced a downward trend over the past week, accompanied by reduced trading activity compared to the previous week. Prices for commonly traded grades remained on a downward trajectory. Despite an increase in spot export prices for LLDPE in the US due to higher rail car indications, market participants anticipated sluggish activity until the end of the month, prompting traders to adjust prices downward. Despite stable prices and limited prompt availability, international buyers resisted price hikes, leading to challenges in incremental export sales. Additionally, despite the rise in feedstock Ethylene prices driven by higher Naphtha costs, LLDPE prices remained unaffected due to ample supply of the product.

Throughout this week, the Asian LLDPE market sustained stability, maintaining a consistent balance between supply and demand. However, there were notable observations of shortages in Middle Eastern origins and escalating freight rates, influencing market conditions. Despite a cautious uptick in demand and the film industry transitioning into its off-season characterized by restocking and terminal inquiries, actual order transactions remained subdued, further compounded by weak downstream demand. Moreover, the recent decline in Crude oil prices impacted production costs, partially attributable to the high-interest rate environment in the United States, which subdued demand. Additionally, bearish US inventory data and diminishing geopolitical risk premiums contributed to this trend. These factors collectively underscore the equilibrium in the LLDPE market, where supply constraints and fluctuating external factors have influenced pricing dynamics amidst subdued demand.