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Domestic PP, PE markets nudge higher ahead of long holiday in China

by Thi Huong Nguyen - thihuongnguyen@chemorbis.com
  • 29/04/2024 (10:58)
In China, local PP producers succeeded in achieving a slight margin expansion, while PE sentiment turned more upbeat with some fresh increases during the week ending on April 26. Slightly higher futures coupled with lower local inventory levels mainly propelled the prices. Meanwhile, some replenishment activities ahead of the Golden Week holiday from May 1 to May 5, which aided the latest uptrend.

LDPE pioneers upturn, at more than one-year high

Over the week ending on April 26, local LDPE film took the lead in the upward movement across China’s local polyolefin markets. Following the latest increases of CNY150-160/ton ($21-22/ton), the weekly average price of local LDPE film in USD climbed to its highest level since mid-March 2023, according to ChemOrbis Price Index data.

Meanwhile, HDPE film remained the weakest among the three main PE film grades, though sellers managed to roll over prices after issuing some downward adjustments in the previous week.

As for PP, the overall ranges for local prices were assessed CNY50-100/ton ($7-14/ton) higher at CNY7500-7750/ton ($917-947/ton without VAT) for homo-PP raffia and inj. and stable to CNY100/ton ($14/ton) higher at CNY7700-7900/ton ($941-966/ton without VAT) for PPBC inj., all on an ex-warehouse, cash including VAT basis. ChemOrbis Price Index shows the weekly average prices of both grades reached their nearly-four-month highs.

China-PP-PE

Domestic inventories slip 7% w-o-w

The heavy turnaround season in Q1 and Q2 played an important role in the ongoing decline in China’s polyolefin supply at home, which paved the way for sellers to test the markets with hikes. Sustained export orders, especially for PP, also alleviated supply concerns inside the country, according to market participants.

“Domestic prices rise further amid tighter supply in the East and South of China, where most of the plant turnarounds are happening. The recent maintenance among domestic producers contributed to a steady decline in production capacity utilization,” a converter reported.

The two major local producers’ combined polyolefin levels were at 750,000 tons on April 26, indicating a visible drop of 55,000 tons, or nearly 7%, when compared to the previous week, according to market sources. Domestic inventories experienced continuous weekly decreases after the Qingming Festivals.

However, players have taken a cautious approach toward the current market conditions, as availability has remained abundant. A local trader opined, “Domestic and foreign sellers are trying to increase prices, but domestic destocking is slow, and the supply pressure persists.”

Another player added, “Currently, there’s no supply pressure on petrochemical inventories. However, it’s anticipated that inventory pressure will surge after the holiday period, with inventories expected to accumulate to approximately 900,000 tons.”

Pre-holiday demand emerges, albeit limited

Adding to reducing supply was a slight uptick in buying enthusiasm in the run-up to the prolonged Golden Week holiday, with demand coming from plastic woven products, film packing applications, as well as food and beverage packaging.

In the meantime, market participants flagged that the pre-holiday demand fell short of expectations since buyers continued to focus on essential purchases. “The demand growth is limited, with most downstream converters purchasing to cover immediate requirements. High prices of raw materials have cut into their profit margins, leading to unhealthy buying enthusiasm,” said another trader.

Eyes on fluctuating upstream, futures markets

Even though PP and PE producers remained under cost pressure, the recent volatility in oil prices and Dalian futures weighed on the trading atmosphere, with a market source saying, “The downward trend in crude oil prices has weakened cost support, while futures have declined, impacting spot markets.”

Following previous downswings, crude oil slid below and remained under the $90/bbl threshold. However, Brent futures recorded an increase of nearly $1/bbl in the latest settlement, while the benchmark rose further to be quoted at $89.30/bbl at the time of writing.

September PP and LLDPE futures on the Dalian Commodity Exchange posted weekly losses of CNY34/ton ($5/ton) and CNY63/ton ($9/ton), respectively, as of April 25. Meanwhile, both futures rebounded by CNY61-93/ton ($8-13/ton) during the session on April 26.
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