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China’s local PP markets snap 6-week downtrend, players skeptical

by Thi Huong Nguyen -
  • 14/11/2023 (01:48)
The downtrend in China’s domestic PP markets, which kicked off in late September, was snapped by a slight rebound last week. Rising futures prices mainly fed the gains, despite the fact that market fundamentals remained unfavorable due to weak buying interest and sufficient availability.

As for the week ending on November 10, domestic prices were assessed stable to CNY50/ton ($7/ton) higher from the previous week for homo-PP raffia and inj. at CNY7400-7800/ton ($898-946/ton without VAT) and stable to CNY100/ton ($14/ton) higher for PPBC inj. at CNY7700-8000/ton ($935-972/ton without VAT) both on an ex-warehouse China, cash including VAT basis.

PP - China

Higher futures coupled with other catalysts

Most market participants attributed the reversal inside China to the uptrend in PP futures market, which boosted sentiment among spot players and resulted in higher pricing from suppliers last week. In the meantime, higher delivery costs reportedly contributed to firmer PP prices.

A trader said, “Players approach the spot market with a positive attitude as PP futures prices have increased during the recent settlements. Most upstream producers are actively raising prices due to the dual support of rising futures and higher delivery costs.”

Additionally, firm propylene prices provided cost support to a certain extent, while some players also pointed to macroeconomic factors, which were said to become more prominent. ChemOrbis data shows that propylene prices were maintained at $850/ton CFR China as of November 8 on higher propane and incremental demand.

Sustainability under question

Players remain skeptical about the recent cautious upturn in the domestic market, as its key driver is futures prices, not supply-demand dynamics.

The off-peak season, combined with a global economic slowdown, has continued to dampen buying enthusiasm from both converters and end users, leading to a slow pace of inventory destocking. “Converters’ inventory levels are still high as end-user demand for finished goods has been weak for several months. This situation is a bottleneck preventing inventory destocking of both raw materials and end products,” a converter commented.

Meanwhile, supply concerns remained on the table given waning demand at home and weakening export activity, which might prompt sellers to shift focus to the domestic market instead. Chinese exporters reported a closed export window between China and nearby Southeast Asia, while export prices have lost some advantages due to higher local prices and the appreciation of the yuan against the USD, according to players.

Furthermore, January PP futures on the Dalian Commodity Exchange settled CNY121/ton ($17/ton) lower at CNY7670/ton ($930/ton without VAT) on Monday, November 13, failing to sustain last week’s upturn.
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