China’s comeback: What’s in store for polymer markets after the break?

Chinese polymer players are stepping away from their desks this week as the country observes the National Day holiday. Despite the seasonal optimism brought by ‘Golden September, Silver October,’ demand recovery across most polymer segments has fallen short of expectations. Prices have struggled to gain momentum due to persistent oversupply, weaker international demand, and a sluggish domestic economy.

As China gears up for a return next week, here are the key factors that could shape post-holiday market dynamics:

• Challenges in sustaining demand recovery amid oversupply concerns


• Lack of upstream cost support


• Potential impacts of economic stimulus packages


• Trade barriers and new regulations in key export destinations


• Logistical issues and freight volatility

Polyolefins: Price recovery prospects face hurdles

Despite the high season of ‘Golden September – Silver October,’ polyolefin markets in China have yet to see a sustained price or demand recovery.

The PE market has shown modest improvement, particularly in LDPE film, which outperformed HDPE and LLDPE due to supply constraints. However, the overall recovery has been tepid, and demand remains weak outside of certain sectors like agriculture and packaging. Import prices have increased by 5% for LDPE, 3% for LLDPE, and only 1% for HDPE since mid-August, according to ChemOrbis data.

PP, on the other hand, has seen little price movement since early September. According to ChemOrbis, homo-PP raffia and injection prices hit $895/ton CIF in mid-August, an eight-month low, and remained at that level by September 27.

Looking ahead, some players hold cautious optimism for a post-holiday demand recovery, aided by the People’s Bank of China’s (PBOC) economic stimulus efforts. However, concerns about inventory buildup loom large. As of September 27, polyolefin inventories at China’s two major producers had fallen to 655,000 tons—a 15% drop from the previous week but still 130,000 tons higher than the same period last year. A market player commented, “This week saw the fastest inventory reduction of the year, thanks to pre-holiday downstream purchasing. However, a significant stock buildup is expected after the holiday.”

The market also lacks support from the upstream front, with spot ethylene prices falling to $840/ton CFR China, the lowest since mid-June and spot propylene prices dropping to a six-month low of $845/ton with the same terms.

PVC: What are the chances of a price rebound?

Demand weakness and oversupply have weighed on China’s PVC markets, pushing local and export prices to new lows in September. The The October price rollover from a major Taiwanese producer and the strengthening yuan against the dollar have done little to lift sentiment. However, futures saw some recovery in the pre-holiday week, slowing the pace of declines.

Post-holiday, many expect PVC prices to stabilize after months of downward pressure, with signs that the market may have bottomed out. Producers, especially in Northeast Asia, have faced negative margins, and some will likely push for price recovery. The Taiwanese producer’s price rollover, along with a $25/ton increase in FOB offers, reflects optimism that prices may have reached a floor. India’s expected post-monsoon demand recovery could also contribute to price stability.

India’s anti-dumping duties (ADD) investigation remains a key factor to watch, as a ruling in favor of ADD could limit low-cost Chinese imports, supporting prices in India. However, without stronger demand, particularly in China and India, any recovery will be limited.

Styrenics: Demand weakness clouds post-holiday outlook

Import ABS prices remained stable in September, while PS markets trended lower. A lack of demand recovery has weighed on sentiment, prompting sellers to offer discounts despite high production costs. As of late September, HIPS and GPPS injection prices hit seven-month lows on a CIF China basis.

Post-holiday, both PS and ABS markets are expected to experience narrow price movements. A mild improvement in demand might emerge in sectors like consumer goods and appliances, but global demand weakness and oversupply will likely cap any significant recovery. Players are expected to remain cautious, waiting for stronger demand signals before making significant moves.

PET bottle: Sluggish demand keeps market under pressure

Both domestic and export PET bottle markets continued to follow a stable to softer trend in September, with prices reaching around three-and-a-half-year lows ahead of the National Day holiday. According to data from ChemOrbis Price Index, the weekly average of FOB China prices has seen a cumulative drop of 8% since the downtrend began in mid-July.

The PET bottle market is expected to remain under pressure post-holiday due to persistently weak demand, despite recent feedstock price rebounds and production cuts.

Outlook and potential scenarios

Post-holiday, much of the market’s recovery hinges on demand. For producers, any uptick in demand could provide relief, particularly in markets like PVC, where prices may have bottomed out. However, oversupply remains a persistent concern, especially in polyolefin markets, where inventories are expected to rise significantly after the break.

Buyers are likely to adopt a cautious approach, holding back on purchases unless they see clear signs of recovery. The People’s Bank of China’s stimulus efforts could help support demand, but the market remains vulnerable to global economic uncertainties and trade barriers.

Another key element that could influence the market is the ongoing decline in freight rates. The global container freight index has dropped significantly since July, with some routes from China to Europe seeing reductions of over 50%. Rates to the US have also decreased but are stabilizing somewhat due to the potential strike at US East Coast ports. If the strike proceeds, it could disrupt supply chains, slowing freight declines and possibly halting the current slump. However, without stronger demand in key export destinations like the US and Europe, the recovery in freight rates is unlikely to boost polymer prices.