PE Imports to Rise amid Downward Fluctuation in USD
Introduction: Entering late August, the USD/CNY exchange rate weakened amid fluctuations, which reduced the cost of importing PE and thereby stimulated end producers’ buying interest. China’s PE import volume is estimated to reach 3,791.3kt in Q3, up 8.18% YoY, thus increasing the supply pressure.
1. Buying interest rising in weakening USD
The minutes from the July monetary policy meeting released by the Federal Reserve on August 21 indicated that if economic data trends such as inflation evolve as expected, the Fed might cut interest rates at its September meeting. The market has broadly anticipated a rate cut by the Fed starting in September. Influenced by this expectation, the RMB reached a new high against the USD. As of September 6, the central parity rate of RMB/USD was reported at 7.0925, down 64 basis points from the previous trading day. The weakening of USD provided support for importing PE from the cost side, which increased end producers’ enthusiasm in inquiry, suggesting an improvement in the trading atmosphere in the USD market.
Source: China Foreign Exchange Trade System
2. Better trading for low-priced resources with narrowing price spread
Entering July, with weakened end demand, prices of both Chinese-made and imported resources fell, gradually narrowing the price gap and reversing the situation. Moving into August, due to further weakened demand in European and American markets and relatively high inventory levels of feedstock at downstream producers in Southeast Asia, international market prices fluctuated downwards. In China’s domestic market, downstream industries showed weakness, with downstream producers mainly purchasing feedstock on a need-to basis, which failed to effectively support the market. In August, the social inventory increased, pushing China’s market prices downwards and narrowing the price spread between domestic and international markets. In anticipation of better demand in the traditional peak season in September, most end enterprises actively made inquiries at lows, leading to improved transactions for low-priced goods. Given the shipping schedules, there is expected to be a significant increase in import supplies entering the Chinese market in September.
3. PE import volume to hit 3,791.3kt in Q3, up 8.18% YoY
According to GACC, China’s PE import volume totaled 7,835.8kt from January to July 2024, which increased by 6.46% YoY. Looking ahead, with the downward fluctuation of the USD and the narrowing and stabilizing price spread between domestic and international markets, coupled with weakened demand in European and American markets, considering that China remains a major consumer of PE, overseas producers once again turn their focus to China. As a result, the import volume will likely rise gradually.
In summary, with the impending Fed rate cut and the weakening of the USD, the price spread between domestic and international markets is gradually narrowing and stabilizing. Given the expected demand improvement in September, China’s domestic end producers show increased inquiry enthusiasm, improving transactions for low-priced goods. From an overseas demand perspective, the sluggish economy in Europe and America further weakens demand, exacerbating the imbalance between supply and demand. Therefore, more overseas resources may flow into China’s market. Therefore, the PE import volume in Q3 is estimated at 3,791.3kt, an increase of 8.18% YoY.
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