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China's PP upturn enters third week on more bullish fundamentals

by Merve Sezgün -
  • 04/06/2020 (03:50)
Import homo-PP prices in China rebounded from a more than 11 year-low in end-March, yet failed to sustain their upward trend for more than two weeks. After almost one month of stability, prices started to gain ground again three weeks ago, and they have been steadily increasing since then.

The rising trend is supported by more bullish fundamentals this time, according to players.

Import raffia prices hit 15-week high

Data from ChemOrbis Price Index reveal that the weekly average of homo-PP raffia prices on CIF China basis has recently reached $850/ton CIF, the highest level since mid-February. Prices have posted a cumulative gain of $55/ton since the upward trend kicked off in around mid-May.

Late last week, a major Saudi Arabian producer announced its June homo-PP offers to the country with a monthly increase of $60/ton.

Demand improves on rising domestic consumption

Players note that China’s PP demand has been gradually improving since the country lifted all lockdowns related to COVID-19 in April.

“Although export demand for Chinese end products remain low, the country’s PP demand has been boosted by increasing domestic consumption amid positive economic data,” they commented.

Amid higher purchasing activity combined with the turnaround season, local supplies have diminished. In early April, the two major domestic producers’ overall polyolefin supplies were still hovering above 1 million tons. As of June 2, they were reported at 770,000 tons.

A few players said that the number of Middle Eastern PP offers was also slightly limited this week while demand towards import cargoes was healthy. “Chinese buyers are willing to accept higher import offers amid the pricier domestic market as well as the recent appreciation of the yuan against the USD,” they explained.

According to data from ChemOrbis Import Statistics, China’s overall PP imports were 10.6% higher on the month in April to reach more than 430,000 tons. On a yearly basis, they were also up by around 2%.

Additional support from rising futures, bullish upstream

Apart from supply and demand fundamentals, players also underlined that rising Dalian futures and strong upstream costs have contributed to the upward trend of PP.

September PP futures on the Dalian Commodity Exchange increased for the sixth consecutive day on June 3. Since May 27, futures have posted a total gain of CNY515/ton ($72/ton).

Global crude oil markets have also been gradually rising since end-April, with both WTI and Brent futures hitting a more than three-month high on June 2, according to the weekly average data from ChemOrbis Price Wizard.

Spot naphtha prices in Asia, meanwhile, have jumped 73% since their upward trend started in late-April.

Sentiment also boosted by demand recovery hopes for SEA

The fact that key markets in Southeast Asia are gradually coming out of their COVID-19 lockdowns has offered grounds for optimism about a demand recovery in the region.
“PP suppliers stand firm on their offers to export outlets as they believe that Southeast Asian demand will soon mirror China,” a trader noted.

Vietnam has already lifted its lockdown ahead of other regional countries and demand from there has cautiously improved. Now players expect Indonesia and Malaysia to join Vietnam in lifting coronavirus restrictions and ramp up manufacturing activities.
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