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China’s import PP, PE markets stable after weeks of declines; is the downturn over?

by Merve Sezgün - msezgun@chemorbis.com
  • 17/06/2021 (08:23)
Import PP and PE prices in China have stabilized this week after around 2-3 months of consecutive drops. Although concerns over demand persisted amid several factors dampening the sentiment, slightly better buying interest has propped up the low ends of the price ranges, players noted.

According to data from ChemOrbis Price Index, import homo-PP raffia, LLDPE film, and HDPE film prices have stabilized at their lowest levels since the second week of February while LDPE film has ceased decreases after hitting an eight-month low.

Import PP LDPE LLDPE HDPE film Prices - CIF China

Import PP offers regain competitiveness against locals

China’s domestic homo-PP market moved below import prices in late March and stayed there for six straight weeks. During that period, demand towards import PP offers remained scant. As the import market has regained its competitiveness against locals starting from May, buyers have become more interested in import purchases.

Since the downturn kicked off in mid-April, the weekly average of homo-PP raffia prices on CIF China basis has witnessed a total decrease of 14%, meanwhile.

Import LDPE attracts some demand after plunging 25% in 11 weeks

As for PE, players noted that Chinese converters were slightly more eager to make some purchases after the Dragon Boat Festival celebrated on Monday, June 14. Demand was reported particularly for LDPE film, which plunged 25% during the downturn to hit its lowest level in eight months.

“Downstream factories have gradually become more interested in purchasing polyethylene since they returned from the holiday. LDPE sees better demand compared to HDPE and LLDPE. However, purchasing volumes are limited because domestic orders are weak amid the off-season in the packaging sector. Demand towards Chinese end-products has also been hit by surging freight costs,” a trader explained.

Bearish factors are not gone

However, several players warned that polyolefin demand from China was still limited to buyers’ urgent needs while supplies were ample since most import suppliers tried to divert their cargoes to China amid the absence of the Covid-hit Southeast Asian countries.

“Plus, the turnaround season in the country is ending and new polyolefin capacities are on the way,” a trader added.

Two end-product manufacturers opined, “Import PP and PE prices have stabilized. But we are not sure as to whether they can hold at the current levels. Despite the strong crude oil performance, demand concerns persist over COVID-19 infections and electricity shortages in Guangdong. India’s Covid crisis and Southeast Asian countries’ resurgence - all leading to bearish downstream demand and reduced buying. And suppliers are diverting cargoes to China which faces a mounting inventory issue of both local and imported material.”

The two major domestic producers’ overall polyolefin inventory level was reported at 750,000 tons on June 16. Week over week, inventories were up by 20,000 tons.

Last but not least, ethylene and propylene prices in Asia have not been providing any cost support to polyolefins since they have shrugged off the bullish crude oil. Spot ethylene prices were assessed at $900/ton CFR China on June 16, down $60/ton on the week. Spot propylene prices were also down by $50/ton from last week to be assessed at $1000/ton with the same terms.
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