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China’s PP, PE, and PVC markets slump on government plans of intervention in record-high coal price

by Pınar Polat -
  • 27/10/2021 (14:58)
China, the world’s biggest producer and consumer of coal, is considering intervention in coal prices which reached record-high levels amid the country’s energy crisis. Even talks of government intervention have caused a decrease in coal futures and accordingly, spot coal prices.

The plans of putting new limits on movements in coal prices have also made a tremendous impact on several industries including China’s PP, PE, and PVC markets.

PP, LLDPE, and PVC futures on the Dalian Commodity Exchange have been mostly losing height since the news was heard last week, putting pressure on spot prices.

“The news of an expected government intervention to stabilize coal prices has caused market direction to swing recently. This has affected a lot of industries particularly polyolefins and PVC,” said a trader.

PP prices extend losses into 2nd week

After posting sharp increases following the National Day holiday, both local and import PP prices reversed course over the past week due to weaker Dalian futures and have remained on a downtrend since then.

January PP futures on the Dalian Commodity Exchange have traded lower since October 19 and posted a weekly decrease of CNY862/ton ($135/ton) as of October 26.

Local homo-PP raffia and injection prices have posted a total of CNY1100-1150/ton ($172-180/ton) in the past two weeks to stand at CNY8800-9050/ton ($1218-1253/ton without VAT) on an ex-warehouse China, cash including VAT basis.

As for imports, the total weekly decreases have been relatively smaller at $20-40/ton, with prices standing at $1200-1260/ton CIF China, cash basis.

The trader also commented, “The National Development and Reform Commission issued three consecutive documents to guide the long-term stability of coal prices. Since then, Dalian futures have been undergoing a sharp downward correction, and spot offers have followed suit. We are considering exporting some Chinese PP to Southeast Asia as prices in that region are still higher.”

Import PE prices follow locals lower

Local PE prices in China yielded to lower Dalian futures and headed south following a two-month-long uptrend over the past week.

January LLDPE futures on the Dalian Commodity Exchange have witnessed a weekly decrease of CNY640/ton ($100/ton) as of October 26.

The import PE market has also followed suit this week, with prices changing direction after mostly posting increases since June.

LDPE prices touched the $1700/ton CIF threshold for the first time since February 2014 last week with support from the tight supply. This week, on the other hand, Middle Eastern origin LDPE prices have been down by $30-50/ton on the week to be assessed at $1620-1650/ton CIF China, cash basis.

ChemOrbis Price Index shows that the weekly averages of Middle Eastern HDPE film and LLDPE film hit their highest levels since November 2018 and July 2015 last week, respectively.

A downturn kicked off for HDPE and LLDPE film this week as well, with spot prices posting weekly decreases of $20-60/ton from last week. Middle East origin HDPE film prices are assessed at $1180-1220/ton while LLDPE film prices are assessed at $1200-1240/ton, all on CIF China, cash basis.

Another trader commented, “The sentiment in China’s polyolefin markets has been hit by the news that the government would intervene in coal prices to control the upsurge. Major local and overseas suppliers have lowered their offers to the country. Traders, meanwhile, are struggling due to the price volatility as they purchased material at quite high levels earlier in the month.”

Local PE prices have also witnessed additional decreases of CNY100-960/ton ($16-150/ton) so far this week, meanwhile.

Local PVC prices in free-fall despite tightness

PVC futures and spot prices have been the products recording the largest decreases during this period. Although PVC supply has remained tight inside China, the notable decreases in Dalian futures have weighed on prices.

January PVC futures on the Dalian Commodity Exchange have traded lower since October 20 and posted a weekly decrease of CNY2085/ton ($327/ton) as of October 26.

A third trader said, “PVC futures have been on a free fall since last week, dragging local PVC prices down in line. The majority of PVC producers have revised down their offers while some suppliers have decided to suspend their offers. The only positive thing, for now, is still high coal prices and tightness. However, we think that the near-term trend will depend on the movement of futures and coal prices.”

Local PVC prices in China retreated from their all-time high levels over the past week. Since then, ethylene-based PVC prices have lost a total of CNY1200-2200/ton ($188-345/ton) at CNY12000-14000/ton ($1661-1938/ton without VAT) on an ex-warehouse China, cash including VAT basis. Acetylene-based PVC prices, meanwhile, have slumped by CNY2500-2600/ton ($392-407/ton) at CNY11200-1200/ton ($1551-1661/ton without VAT) with the same terms.
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