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Asian PP, PE players discuss sustainability of China’s rebound

  • 22/05/2017 (04:07)
Following the end of Chinaplas, which was held in Guangzhou last week, Asian players are now discussing the market state after firming futures supported a rebound in China’s local PE and PP markets which had been mostly tracking a downward trend since the end of the Chinese New Year holidays.

Both LLDPE and PP futures on the Dalian Commodity Exchange recorded cumulative increases of $122/ton during the past week, exerting upward pressure on local prices in China.

Players are divided into two regarding the near term outlook as some argue that the recent upturn can be maintained on the back of firmer futures coupled with scheduled maintenance shutdowns at several plants in the country. A few sellers noted, “We think that the market has hit its bottom level as prices have already decreased too much in the last three months. Buying interest might inevitably improve if sellers adopt a firm stance and the trend turns up.”

On the other hand, others question the sustainability of this rebound, pointing to ongoing bearish factors such as persistently weak demand, high local stocks, the fading high season for manufacturing sector and the ongoing environmental inspections which limit converters’ production volumes.

A trader commented, “Local prices increased due to higher futures, rather than real demand. Buyers remain cautious about fresh purchases as they find the recent increases to be mostly artificial.”

Import PP and PE prices in China remained indifferent to local market’s recovery during the past week, with a few players saying, “Demand towards import materials is even worse since the local market can still offer a more competitive edge despite its higher levels.”

When it comes to Southeast Asia, both import and local polyolefin markets were unresponsive to the recent rebound in China for now and remained on a bearish note given fading demand ahead of the approaching rainy season. Regional players mostly concurred, “We are not sure if rising local prices in China will have an impact on Southeast Asian markets in the days ahead as demand is not promising due to the imminent start of the rainy season as well as the month of Ramadan.”
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