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China's PP market at almost 2-year low; H2 outlook bearish

by Pınar Polat -
  • 19/06/2019 (04:07)
ChemOrbis Price Index reveals that import and local PP prices in China have recently hit their lowest levels since July 2017 following the latest round of decreases driven by persistently disappointing demand.

As the market is about to end the first half of the year on a bearish note, players are hardly optimistic about the H2 outlook, pointing to the ongoing abundance in local polyolefin supplies, the upcoming PP start-ups and escalating concerns over the US-China trade war.

Import raffia offers near $1000 threshold

As can be seen in the graph below created by ChemOrbis Price Wizard, the country’s local homo-PP market has been on a downward trend since around mid April while import prices have followed suit for the past six weeks.

The weekly average of homo-PP raffia prices on CFR China basis has posted a cumulative reduction of almost $100/ton since the downtrend kicked off, with the low end of the price range approaching the $1000/ton threshold.

New PP capacities reinforce supply concerns

Local polyolefin supplies in China have been ample ever since the end of the Chinese New Year holiday in February. Concerns over supply have grown recently due to the new capacities that are planned to come on stream in China in the second half of the year.

An additional capacity of around 5 million tons/year will be added to the China’s total PP capacity if H2 start-ups can be completed as expected.

Unpromising demand amid trade tensions, weaker yuan

The prolonged trade tensions with the US and the weaker yuan against the US dollar have kept Chinese buyers on the sidelines, casting a shadow over the demand outlook.

A trader noted, “During the first half of the year, local polyolefin supplies in China have remained long. Now that the new start-ups are on the agenda, it seems like oversupply woes will occupy the market. We also don’t expect to see a revival on the demand side until September.”
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