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China’s local PP, PE markets show lack of reaction to bullish factors

by Thi Huong Nguyen -
  • 30/01/2024 (04:33)
Following some opposing adjustments in the past couple of weeks, the local polyolefin markets in China have remained relatively unchanged, with most suppliers attempting to maintain current pricing levels despite a series of favorable catalysts.

As for the week ending on January 26, domestic homo-PP raffia and inj. prices were assessed stable to CNY50/ton ($7/ton) higher from the previous week at CNY7200-7550/ton ($892-935/ton without VAT) on an ex-warehouse, cash including VAT basis. The overall ranges for PE were assessed stable at CNY8770-9100/ton ($1086-1127/ton without VAT) for LDPE film and at CNY8000-8335/ton ($991-1032/ton without VAT) for both LLDPE and HDPE film, with the same terms.

In the meantime, given a slight depreciation of the yuan against the greenback, the average prices in USD of polyolefin grades indicated marginal decreases, as shown in the graph obtained from ChemOrbis Price Wizard below.


Domestic inventories see visible drops

According to market sources, the two major producers’ combined polyolefin inventories experienced a plunge of 14% within the past week, with the figure being reported at 490.000 tons as of January 26.

The reduction in domestic supply was said to eliminate supply concerns inside the country. A trader underlined, “The stock of PP and PE at home has dropped to a relatively low level, and overall inventory pressure is not significant.”

Meanwhile, the stock level currently increases by 60,000 tons to 540,000 tons as of January 29 due to weekend accumulation, but it’s still lower by 50,000 tons on a weekly comparison.

Both costs and futures are on the rise

Global crude oil prices have been strong amid geopolitical issues, not to mention the bad weather in the US. ChemOrbis data suggests that both oil benchmarks of WTI and Brent climbed to more-than-two-month highs last week and scored the biggest weekly increases of 6.3% since the Israel-Hamas conflict fired in early October.

Rising energy prices propelled a firming trend in the upstream ethylene and propylene markets and, in turn, production costs for PP and PE producers. Spot ethylene prices rose $20/ton from the previous week to $910/ton CFR China, while propylene prices on the same term also edged $10/ton higher to $845/ton as of January 26, according to ChemOrbis data.

In addition, PP and LLDPE futures prices have tracked an uptrend since January 12, with accumulative gains of CNY223/ton ($31/ton) and CNY265/ton ($37/ton), respectively, except for some downward adjustments in the settlements on January 25-26.

Buyers’ resistance casts cloud on bullish factors

The upcoming Lunar New Year has indeed stirred pre-holiday buying enthusiasm to a certain extent. Buyers reportedly entered the markets for advanced replenishments, which were partially proven through the decline in domestic inventories.

On the flip side, the lengthy holiday, combined with a weakness in downstream businesses, prompted more factories to shut down earlier in order to prepare for family union visits, preventing a meaningful improvement in demand. Besides, buyers across polyolefin markets remained in a cautious mode and preferred minimal restocking for basic requirements.

“Demand for packaging and injection molding remains acceptable, but other sectors remain weak. Considering previous replenishments and the increasing number of downstream factories planning to take early holidays, buying volume is limited,” noted a trader.

Adding to a bearish state of demand was buyers’ resistance toward high prices, posing more threats to the PP and PE movements. A converter commented, “Limited transactions and resistance from buyers continue to weigh on suppliers’ stance.”
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