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China’s local polymer markets return from holidays on firm footing

by Pınar Polat - ppolat@chemorbis.com
  • 12/10/2022 (13:57)
Chinese markets were closed for a week-long holiday due to National Day that began on October 1. Starting this week, trading has gradually resumed with initial indications of a firm return for local polymer markets, although the sustainability is mooted amid a slew of factors.

Contributing to the recent increases is the rise in crude oil prices after the OPEC+ output cut over the past week, which also lifted Dalian futures prices on Monday. Reduced supply levels for the polyolefins, caused by sustained run rate cuts, also have encouraged sellers to attempt hikes right after holidays.

Polyolefins

Expectations about how China’s local PP and PE markets will return from the holidays were already calling for a firm sentiment, with players citing improving demand with “the Golden September Silver October season” as well as limited overseas supply amid turnarounds.

Local homo PP raffia and injection prices have been up by CNY250/ton ($54/ton) from the pre-holiday levels to stand at CNY8,350-8,450/ton ex-warehouse China, cash including VAT ($1039-1051/ton without VAT).

As for PE, the initial price levels reported were standing at CNY10,400/ton ($1294/ton without VAT) for LDPE film, at CNY8650/ton ($1076/ton without VAT) for LLDPE film, and CNY8,700/ton ($1082/ton without VAT) for HDPE film, on similar terms. These levels were up by CNY300-400/ton ($65-85/ton) from pre-holiday levels.

A trader commented, “Crude oil prices went up during the China holidays following the news of the OPEC+ oil production cut. Futures prices followed suit so cost support is strong. Major Chinese suppliers’ inventory levels were around 765,000 tons. Sales pressure is still alright. Hence, major Chinese producers have increased their offers after the holidays. We expect prices to stay stable to slightly firm over the near term.”
Polyolefin supply at home tolerable even after holiday

While the two major Chinese producers’ combined polyolefin inventory was standing at 575,000 tons on September 30, levels accumulated by 190,000 tons or 33% to 765,000 tons on Monday, October 10. As of October 11, meanwhile, they were standing at 750,000 tons.

PVC

The country’s PVC markets have also had a firm start to the post-holiday period, albeit at a slower pace than polyolefin markets. The initial price levels reported were standing at CNY6750-6800/ton ($840-846/ton without VAT) for ethylene-based, and at CNY6400-6450/ton ($796-802/ton without VAT) for acetylene-based, on similar terms. These levels were up by CNY50/ton ($11ton) from pre-holiday levels.

The Monday’s rise in Dalian futures is also supported by a slight uptick in demand, traders said.

“Spot PVC offers have increased following firmer futures prices in the early week. Demand has also improved this week as buyers are more active in replenishing material when prices are on an uptrend. We will need to monitor if the improvement in demand could sustain longer. Provinces such as Xinjiang, Ningxia, and Inner Mongolia are affected by the latest Covid outbreaks. This also has an impact on both PVC production and also transportation,” another trader commented.

Styrenics

A Chinese PS producer increased offers to the local market by CNY100/ton ($21/ton) from late September to CNY10550/ton ($1312/ton without VAT) for GPPS injection and CNY11000/ton ($1368/ton without VAT) for HIPS injection while stability was reported for ABS prices for the same period at CNY12700/ton ($1580/ton without VAT) on similar terms.

Covid-19 cases rise while Party Congress round the corner

Fresh Covid-19 outbreaks have been reported across several parts of the country right after the end of the holidays, although mobility was slower than in previous years as the ongoing curbs already discouraged people from travelling.

In the meantime, there are only a few days left before the 20th National Congress of the Chinese Communist Party in Beijing to be held on October 16. The major event is expected to give signals of whether there will be a shift in the government’s zero-case policy while it is also important in terms of the economic route. China, the world’s second-largest economy, has suffered from the pandemic with strict restrictions hurting consumer demand and stalling businesses.

These concerns along with the recent fall in oil prices may prompt caution among buyers.
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