Major global markets including Southeast Asia, Turkey and Europe have recently received more US PE quotes after a long absence. This is the end to the inventory build-up in the US, a year-end lull, and the Omicron variant putting additional strain on demand.

The traditional year-end stock clearance from the US has not been popular in the past two years. Supply chains were severely disrupted after a series of storms in 2020 and the global shipping crisis limited exports from the US.

Contrary to the downward price momentum seen in Q4 2018 and 2019, US-origin PE prices in Southeast Asia and Turkey are mostly on a steady or upward trend in 2020.

However, this year US PE re-emerged in October due to increased export allocations. The pressure from these shipments became more pronounced in December when prices formed a low segment or were below other origins.

US LD forms a low-priced segment in China

US LDPE has formed a low price segment in the general import price range, at US$1440/ton in CIF China, cash, on par with Indian origin. The Chinese market is being influenced by the bleak demand outlook and capacity additions.

Downstream market participants may miss the Lunar New Year holiday earlier than expected due to weak orders because of the Omicron variant. China's dependence on PE imports will fade as factories startup. This coupled with poor margins in China could prompt importers to look to other destinations.

US PE re-exports find their way to Southeast Asia

Southeast Asia, a major destination for US PE exports, has come under more obvious pressure from US goods due to year-end inventory clearance. Import suppliers prefer to redirect their goods to this region due to higher margins and weak Chinese demand.

American HDPE blow molding re-exported from Taiwan was traded at 1130 USD/ton CIF Vietnam. These prices are much lower than popular Middle Eastern provenances, providing a competitive advantage for sellers to free up inventory.

US PE quote lower than Middle East material in Turkey

In Turkey, US PE quotes came in with a marked drop in December, believed to be a short sell-by some market participants due to inventory build-up on concerns over Omicron and holidays. end of the year.

The US PE price range is estimated to decrease by 100-110 USD/ton LDPE and HDPE, respectively, to 1600-1620 USD/ton and 1350-1370 USD/ton CIF, subject to 6.5% tax. Although not widely confirmed, LDPE quotes as low as $1550/ton have also been heard from the market. The price range of LLDPE C4 film also decreased by 50 USD/ton, to 1450-1470 USD/ton in the same manner.

PE goods of US origin are currently priced at about 30-60 USD/ton lower than Middle Eastern materials. These competitive quotes are likely to lead to further discounts from Middle Eastern sellers in January.

Europe prepares for more US PE

Recently, US PE film quotes have begun to appear more frequently in Europe, the region that offers the most attractive returns to date. While prices are still not attractive enough in both domestic and import markets, pressure is expected to increase in Q1 2022. US HDPE film quotes at EUR 1550-1600/ton DDP, 60 days, while quotes for LDPE and LLDPE are at EUR 1780-1800/ton and EUR 1560/ton, respectively, for delivery from January to the end of February.

According to statistics, total US PE exports from January to October 2021 fell 17% year-on-year due to severe production disruptions. Nearby destinations including Canada, Mexico and Brazil are the only routes to which the US has increased its exports this year while it has lost significant market share in China, Malaysia, Turkey and Singapore.

Statistics show that US PE exports to Europe are somewhat different. Exports to Belgium fell 3% year-on-year, although Belgium remains the third-largest destination with more than 655,000 tonnes after Mexico and Canada. PE exports increased 11% to Spain and 9% to the UK while exports to Italy fell 21%.

Seller competition seems inevitable as Europe is gearing up for more US PE shipments starting February-March, averting production and port operations disruptions. Besides, freight rates from the US to Europe are not too high to prevent US PE flows, as for routes from China to the rest of the world.

Some sources suggest that a series of maintenance rounds in the region could help alleviate pressure from an increase in supply in the first quarter of 2022.