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Falling domestic stocks fail to lift PP, PE sentiment in China ahead of holidays

by Merve Sezgün -
  • 28/01/2021 (03:54)
In China, the two major producers’ total polyolefin stocks fell slightly below 500,000 tons in mid-week due to pre-holiday replenishment activities. Although inventory levels moved below an important threshold, sentiment for both PP and PE was somewhat soft given the upcoming holidays.

Chinese New Year holidays will start in mid-February and last for one week officially. However, many downstream players traditionally start to leave their desks earlier so that workers reach their distant hometowns on time. Business activity tends to be much reduced during this period.

Pre-holiday stocking will soon be completed

On January 27, the two major Chinese producers’ total polyolefin stocks were reported at 490,000 tons. The level indicated a decrease of 50,000 tons from a week earlier.

“There has been an active stocking up since last week inside China as end-product manufacturers built some stocks for the initial post-holiday weeks. However, this holiday demand will soon fade away, with downstream players starting to shut their factories and send workers home. Hence falling supply levels are not a concern at the moment,” a few traders explained.

Local prices under pressure from weak demand expectations

In the domestic market, PP and PE prices were stable to slightly lower when compared to last week despite the visible reduction in major producers’ stock levels.

Active demand for prompt cargoes helped prices see a short-lived rebound last week. However, lower futures at the start of the current week prevented any further hike attempts. “Prices are under pressure from expectations about waning demand heading towards the holidays,” players noted.

May LLDPE and PP futures on the Dalian Commodity Exchange witnessed cumulative decreases of $21/ton and $15/ton, respectively, on Monday and Tuesday before they both increased $12/ton on Wednesday.

Import prices mostly stable to slightly softer

As can be seen in the below graph created by ChemOrbis Price Wizard, China’s import homo-PP raffia market has not witnessed any significant price movements since it stabilized at around a 17-month high in late November.

Homo-PP raffia prices for all origins were largely stable this week at $1050-1090/ton CIF China, cash.

A trader commented, “Import PP prices into China are standing well below other markets such as Turkey, Africa, and Latin America. Hence sellers from different parts of the world are focusing on these markets to achieve better netbacks. Even Chinese suppliers are targeting the Latin America market nowadays thanks to the arbitrage window.”

Import LDPE HDPE LLDPE Homo-PP raffia Prices - China

As for PE, import prices for all origins were also stable from last week at $960-1010/ton for HDPE film and at $960-1080/ton for LLDPE film, on CIF China, cash basis. LDPE film, meanwhile, was stable to $10/ton lower at $1320-1370/ton with similar terms.

A trader based in the country noted, “Demand towards import LDPE and LLDPE has picked up since last week, with buyers securing some cargoes amid worries about transportation issues. HDPE, however, is still the weakest grade in terms of buying interest. The low season has kicked off in the HDPE pipe market while the ban on single-use plastics has hampered HDPE film demand.”

Despite the recent improvement in purchasing activities, the upcoming holiday weighs on PE sentiment since demand will soon be gone. Falling spot ethylene prices are also exerting pressure on the market, players also highlighted.
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