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China’s PP and PE markets bolstered by series of plant shutdowns

by Başak Ceylan -
  • 14/04/2020 (09:49)
In China, PP and PE markets staged a recovery from their lowest levels in more than a decade last week. This was supported by a combination of rising demand for certain applications, such as food packaging and medical applications, higher futures, and the recent economic data showing a positive note. And now market players are facing a busy maintenance schedule: Will shutdowns help extend the recovery?

Reduced supply, strong demand lend support

Things started to take a positive turn as China’s COVID-19 containment measures proved to be fruitful. As lockdown measures are being scaled back after many months, China’s manufacturing activity has increased and markets have recently begun to enjoy some support from a pick-up in demand. This was particularly for food packaging materials and medical applications amid tightening supplies. The recovery has also been driven by higher crude and firmer PP and LLDPE futures on the Dalian Commodity Exchange.

The coronavirus outbreak has had a tremendous impact on China’s economic growth and polyolefin demand. The outbreak started to take hold of the Chinese market in around late January as manufacturing began to slump. Further, supply chains were disrupted amid measures imposed to control the spread and demand collapsed as a result of lower consumption as well as spending.

Markets rebound from record lows

A local producer hiked PE offers last week, largely due to easing inventory pressure and stronger LLDPE futures. A similar scene was seen in PP prices. Amid ramped up efforts to produce face masks, domestic homo-PP fibre prices have recorded unprecedented gains. Players reported facing tight supply for homo-PP fibre and raffia while non-woven supply was reported as short.

According to data from ChemOrbis Price Index, the weekly averages of homo-PP, LDPE, LLDPE and HDPE film prices on CIF/ex-warehouse China rebounded last week after hitting more than a decade low. A series of plant shutdowns that are planned or currently taking place in China look set to further tighten supplies for both PP and PE grades and support the rebound of the markets.

China braces for a busy shutdown schedule

According to ChemOrbis Production News, China is bracing itself for a heavy shutdown program between April and July. A total of 16 PE plants are slated to be down for shutdowns, amounting to nearly 4.5 million tons/year of capacity. For PP, the total number of plants adds up to 12, with more than 3 million tons/year of capacity.

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