China and Southeast Asia polymer markets lose momentum as oil prices retreat

Polymer markets across China and Southeast Asia have entered a cautious phase after crude oil prices erased most of last week's rally. With Brent crude falling from nearly $100/bbl to below $90/bbl within two trading sessions, both polymer and upstream olefin markets have lost clear price direction. Market participants are now adopting a wait-and-watch approach as they assess whether the recent decline in crude is temporary or the beginning of a broader correction.

The softer energy market was quickly reflected in China's futures market, where September PP, LLDPE, PVC and MEG contracts on the Dalian Commodity Exchange posted further losses during the first two trading sessions of the week. The decline also pressured domestic spot markets and reinforced cautious buying sentiment.

Just a week ago, discussions were centered on whether limited supply was supporting higher prices. This week, attention has shifted toward pricing, with buyers becoming increasingly reluctant to accept higher offers after crude oil's sharp decline. While supply remains tight in some PP grades and prompt cargoes across parts of Southeast Asia, demand has weakened considerably.

China's domestic market softens while imports stay relatively firm

Lower Dalian futures quickly affected China's domestic polymer market, where PP, PE and PVC prices eased during the first half of the week, reversing part of last week's gains.

Market participants noted that although domestic prices weakened alongside crude oil and futures, import offers remained relatively stable. PP and LDPE import prices continued to edge slightly higher, while HDPE and LLDPE imports remained mostly stable. However, many traders expect import prices to gradually adjust lower if domestic weakness continues.

Some traders also reported fewer PE import offers, as overseas suppliers found the Chinese market less attractive because of weaker netbacks.

Market fundamentals remain mixed. Some participants believe ongoing plant maintenance and delayed restarts could tighten supply, while demand from food packaging and daily consumer goods continues to provide stable consumption despite weak agricultural film demand.

Others expect additional supply to enter the market following the startup of new production facilities and the restart of maintenance units. Combined with seasonally weak downstream demand, this could place further pressure on prices and producer margins.

Export activity has also slowed, with traders reporting that many Southeast Asian buyers have already completed earlier purchases and are no longer actively replenishing inventories.

Converters remain cautious as well. Many buyers have reduced purchasing activity following the decline in crude oil, resulting in fewer inquiries and limited trading activity. PVC market participants also noted that although oversupply and sluggish construction demand continue to weigh on prices, reduced operating rates at some producers have helped prevent a sharper decline.

Southeast Asian buyers resist higher offers

The gap between sellers' expectations and buyers' willingness to purchase has become more visible across Southeast Asia.

Although most import offers remained stable, a major Saudi producer announced substantial increases for August PE shipments to Vietnam, with some grades rising by as much as $200/ton. Buyers largely viewed these higher offers as difficult to accept following the recent correction in crude oil.

In Indonesia, a major domestic producer decided to maintain PP and PE prices after implementing eight consecutive rounds of increases, indicating that suppliers are also reassessing market direction.

Vietnamese buyers have remained particularly cautious. Many converters reported holding sufficient inventories purchased earlier and are waiting for those shipments to arrive before making new purchases. Several buyers believe current domestic and import prices are too high considering weak downstream demand.

Some traders also noted that local availability remains limited because many suppliers have already sold out and are waiting for August arrivals. Even with tighter prompt supply, buyers continue purchasing only essential volumes, anticipating that lower crude oil prices could eventually trigger another round of polymer price corrections.

In Indonesia, opinions remain divided. Some converters believe supply is adequate and expect prices to remain stable or soften in line with weaker energy markets. Others said rising resin costs have outpaced finished-product prices, forcing manufacturers to absorb higher raw material costs.

Meanwhile, traders in the Philippines reported slightly firmer domestic PP and PE prices due to higher monomer costs, although the recent decline in crude oil has made buyers increasingly cautious.

Crude oil becomes the market's key driver

Market participants generally agree that crude oil has once again become the primary factor influencing polymer prices across Asia.

Ethylene and propylene prices have remained largely stable this week, with buyers and sellers alike describing the market as lacking clear direction while waiting for a stronger signal from the energy market.

Despite ongoing geopolitical risks, shipping concerns and selective supply constraints, most buyers are unwilling to build inventories until oil prices establish a clearer trend. The market is now closely watching whether sellers adjust polymer prices in response to weaker crude oil or continue relying on higher production costs and tight supply to support current price levels.

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