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December PP, PE offers emerge lower in China, SE Asia

by Pınar Polat - ppolat@chemorbis.com
  • 01/12/2021 (03:21)
PP, PE players in China and Southeast Asia have received December offers from regional and overseas suppliers with decreases since the beginning of this week. The impact of the new Omicron variant and the recent fall in crude oil prices have added to the downward pressure driven by the ongoing weakness in China’s polyolefin markets.

ChemOrbis Price Index shows that import PP and PE prices in China and Southeast Asia have already been on a downward trend since late October, meanwhile.

Mid-East supplier cuts LDPE offers to China notably

An agent of a major Saudi Arabian producer reported that their supplier cut December
PE and PP prices to China when compared to November. Among all products, LDPE witnessed the largest monthly price reduction of $150/ton while HDPE and LLDPE were down by $40/ton, and homo-PP raffia prices were down by $80/ton.

The agent commented, “China’s polyolefin markets have been under downward pressure from lower crude oil, falling Dalian futures as well as the Omicron variant outbreak. Our sales orders dropped by 50% this year due to our customers’ lower sales and there are no signs of a recovery in replenishing activity ahead of the Chinese New Year. We think all buying activity will remain on a needs-only basis over the near term.”

Further regulations for coal lurk, weighing on Dalian futures

PP and LLDPE futures on the Dalian Commodity Exchange settled lower from November 25 to November 30, witnessing cumulative decreases of CNY523/ton ($82/ton) and CNY624/ton ($92/ton), respectively.

The steady fall in futures prices was mainly due to the government’s renewed signals of further regulations for the prices of coal. Lower crude oil prices also contributed to the weakness, meanwhile. The global benchmarks plunged to their lowest levels since September on Friday, November 26 due to growing demand concern amid the Omicron variant.

This has contributed to the weakening sentiment in China’s PP, PE markets, where prices have already been under pressure from limited demand and oversupply concerns amid new capacities.

SE Asian supplier reduces both local and import PP, PE offers

A Southeast Asian producer also applied monthly decreases of up to $100/ton on PP and PE offers to Indonesia while lowering local PP and LLDPE offers to Malaysia more slightly, within the range of $19-24/ton.

Omicron hinders demand recovery in SE Asia

Following the emergence of several Southeast Asian countries from lockdowns or severe restrictions due to Covid-19, demand in Southeast Asia displayed some recovery.

However, the spread of the new Omicron variant is likely to hamper this recovery as renewed control measures may be brought to the agenda, players have started to voice recently.

In China, where demand has been limited amid the off-season, the news about the Omicron variant has also added to the concerns. Several players in the country have reported that the news about the new variant already weighed on demand further.

Not to mention, PP and PE prices are under heavy strain from new capacities

According to ChemOrbis Production News Pro, PE markets remain under aggregated pressure from some 1.9 million tons of additional capacity since the second half of this year. Meanwhile, a total of more than 5 million tons of PE capacity was planned to come onstream throughout 2021, 64% of which is located in China and 35% in South Korea, needless to say.

As for PP, ChemOrbis Production News Pro suggests that more than 12 millions tons of PP capacity was slated to start up throughout 2021 in Northeast Asia, 77% of which is located in China and 23% in South Korea.
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