China’s PP, PE markets enter post-holiday period on firm note

Players in China’s PP and PE markets have started to return to their desks after the lengthy Golden Week holidays. Initial offers indicate rollovers to slight increases from pre-holiday levels thanks to the bullish return of futures, rising oil markets, and macroeconomic support.

”After the holiday, the markets are opening on a stronger footing in light of rising futures, higher crude prices, and positive momentum from the government’s economic stimulus policies,” said a trader.

This bullish sentiment has overshadowed a significant accumulation of domestic inventory, with the combined polyolefin inventory of two major producers increasing by 270,000 tons from the pre-holiday period to 930,000 tons as of October 8. Meanwhile, demand has gradually recovered, although off-take volumes remain tied to basic requirements.

Futures markets reopen with increases

Futures prices on the Dalian Commodity Exchange have resumed their upward trajectory after the extended holiday, reinforcing market players’ confidence.

When compared to the pre-holiday session on September 30, January LLDPE futures rose by CNY164/ton ($23/ton) to CNY8325/ton ($1043/ton without VAT) on Tuesday, October 8. January PP futures posted a larger gain of CNY198/ton ($28/ton), to settle at CNY7740/ton ($970/ton without VAT) on the same day.

Higher oil provides cost support

In addition, the continuous increase in oil prices amid escalating conflicts in the Middle East has fostered better sentiment and increased production costs.

After posting its largest weekly gains since early 2023, Brent crude oil has climbed above the $80/barrel threshold for the first time since August. As of Monday, October 7, Brent crude increased by $2.88, settling at $80.93/barrel, while WTI NYMEX rose by $2.76, closing at $77.14/barrel. However, both benchmark oil futures reversed course with almost 2% decreases during intraday trading on Tuesday, October 8, with China’s briefing disappointing investors.

On the feedstock front, spot prices for ethylene and propylene stabilized after a four-week decline, reported at $820/ton and $840/ton, respectively, on a CFR China basis.

Macroeconomic factors boost sentiment

According to players, market confidence has strengthened since the Chinese government announced several measures aimed at boosting the fragile economy. Nonetheless, the recent press briefings without large-scale stimulus announcements have raised concerns about a robust economic rebound, potentially dimming the trading atmosphere across polyolefin markets.

Meanwhile, the ongoing appreciation of the yuan over the US dollar has increased import demand and prices. The trader added, “The strengthening local currency has supported import activity, with more deals being concluded.” Another trader commented, “The current exchange rate and improved domestic environment thanks to economic stimuli are pushing prices significantly higher.”