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China’s post-holiday polymer outlook supported by supply limitations, crude oil

by Merve Sezgün - msezgun@chemorbis.com
  • 12/02/2021 (11:19)
Chinese New Year holidays finally kicked off on February 11, and the traditional market lull has begun. This year, players went on holiday amid a bullish atmosphere being felt all over the world due to lingering supply concerns and rising crude oil futures. Despite COVID-19 related uncertainties, players mostly expect to find a bullish market once they return to their desks from the lengthy holiday.

What’s happening in other global markets during China’s absence?

It seems that the current events in other polymer markets may affect China’s post-holiday outlook this year more than usual. At this point, players would normally be asking the question if China will ‘buy’ after the holidays or not, as this giant petrochemical consumer has a large impact on global sellers’ pricing strategies for most polymers. However, this may not be the entire case this year.

Needless to say, China’s post-holiday demand is still a very important topic and some players believe that downstream factories in the country may resume their operations right after the holidays -contrary to the tradition- since many workers are not traveling to their hometowns over COVID-19 fears. Players even say that some manufacturers will continue operating during the holiday period.

However, as China goes on holiday, another hot topic continues to rattle the global polymer markets: the unresolved issue of container shipping and high freight costs as a result of it. Prices for most polymers have seen unprecedented gains since H2 2020 across the globe due to supply interruptions amid a shortage of vessels and an unexpected demand surge.

For some products including PP, PE, and PVC, the upward trend in China visibly lagged behind other markets starting from December given the approaching holiday season while the Chinese market has repelled overseas sellers since then due to a widening price gap with the rest of the world.

Hence players expect major polymer suppliers to approach the post-holiday China market with hike requests on the heels of juicy netbacks achievable in other export outlets.

Polyolefin sentiment gains strength despite thinned trade

Despite the holiday-driven slowdown in the market, PP and PE sentiment in China has been improving recently due to rising crude oil futures as well as the relentless hikes in the rest of the world.

Although import prices did not witness any major changes and tracked a stable to slightly higher trend during the last few days before the holidays, sellers turned optimistic about the post-holiday period.

“Post-Chinese New Year PP and PE demand will improve amid a tighter import supply in March. Sellers are already planning to adopt a firm stance on their offers to China on the back of strong energy values and surging polyolefin prices in other export outlets,” players opined.

PVC sentiment turns bullish again ahead of holiday

Following a seven-week downturn, local PVC prices in China have resumed their upward trend since last week following the Taiwanese major’s March price hike. Crude oil gains also helped PVC sentiment recover.

According to players, the post-holiday PVC market will be boosted by the return of China demand, already strong demand from India, and supply limitations. Several plants in Asia are planned to be shut for maintenance in March-April. In the meantime, supply from the US is expected to remain tight until April.

Rising costs boost ABS, PS markets

In China, ABS and PS prices resumed their rising trend three weeks ago and have continued to move higher since then. The market has been supported by rising feedstock styrene prices and a lack of stock pressure on suppliers.

“Going forward, rising crude oil and styrene prices, as well as stronger post-Chinese New Year demand, should help lift prices of PS and ABS,” a seller commented.

PET bottle reaches 15-month high

PET bottle prices in China have been trending higher since they hit the bottom around mid-November. Despite the low season, the market has been supported by rising feedstock costs and pent-up demand.

Since the upturn kicked off, the weekly average of PET bottle prices on FOB China basis has recorded a total increase of 32% to reach the highest level in 15 months, according to data from ChemOrbis Price Index.

“PET prices have been boosted by rising PTA costs as well as gradually recovering overseas demand. These factors are likely to keep the market firm in the post-holiday period,” a source from a domestic producer said.
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