China’s PP, PE markets face post-holiday supply surge and tepid demand

In China, PE and PP markets mainly stayed rangebound in the first week after the Lunar New Year holiday. Offers were few and far between, and the available ones mostly experienced rollover attempts from sellers amid the prevailing holiday lull. In the meantime, market sentiment leaned to the weak side in the face of high supply and sluggish demand, casting uncertainty over the near-term outlook.

Supply pressure builds amid post-holiday inventory surge

Even before the Spring Festival, PP and PE players had expressed their worries over a supply glut post-holiday, bearing inventory accumulation and new capacity expansion in mind. Those concerns materialized as domestic availability surged upon reopening.

According to market sources, the two major local producers’ combined polyolefin inventory levels reached 930,000 tons on February 7, remarkably up by around 480,000 tons or 107% from the pre-holiday level.

Further supply pressure came from massive startups that were successfully commissioned by late January. As per ChemOrbis Production News Pro, 1.3 million tons/year of new PE capacities came into production, while China also welcomed three PP plants with total capacities of the same amount last month.

Besides, import supply was said to be ample at Chinese ports, with a trader saying, “There is an abundant supply of imported materials, while domestic stocks experienced huge accumulation during the holiday.” However, some players pin hope on a shortage of imports, especially for PE, in the interim, considering the maintenance season in the Middle East and regional sellers’ preference for more lucrative export outlets such as India and Southeast Asia.

Trade tensions dampen demand recovery

Market activities were slow, as many players had yet to resume full-scale operations after the holiday. A Ningbo-based trader commented, “PP and PE prices are unchanged when compared to the pre-holiday week. Players prefer to sit on the fence to monitor market developments first before engaging in transactions since they are just back to the office from the long holiday.”

Adding to the cautious stance were growing trade tensions between the US and China, driven by tariff disputes. Obviously, with higher tariffs from the US, Chinese factories that use PP and PE polymers to produce finished goods such as packaging, automotive parts, and consumer products might see reduced orders from US customers due to higher landed costs. This would crimp manufacturing across China’s polyolefin downstream sectors and, in turn, dampen demand for raw materials.

According to media reports, US President Donald Trump imposed an extra tariff of 10% on Chinese goods on February 2. While launching a WTO dispute against the additional tariff from the US, China took retaliatory measures, announcing a 10% tariff on US crude oil and a 15% duty on liquefied natural gas (LNG), agricultural machinery, large-displacement cars, and pickup trucks, effective February 10.