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How has recent rise in coal prices affected China’s PVC, PP markets?

  • 10/07/2017 (04:11)
Coal prices in China have been witnessing considerable increases recently in response to the government’s decision about not allowing coal imports at small ports as of July 1, which is expected to tighten supply and support a further rally in prices. Major coal sellers in the country also report that local demand has been quite strong amidst reducing supplies.

The impact of rising coal prices has started to be felt in China’s local PVC and PP markets in the past two weeks, with prices, particularly for acetylene based PVC, posting visible hikes. However, players mostly concur that the impact is likely to be limited on prices for coal-based PP given the lack of support from the demand side.

Local acetylene based PVC prices on weekly average basis have climbed by around $65-70/ton in the last two weeks as per data from ChemOrbis Price Index. As a result of the pressure from rising levels for acetylene based PVC, ethylene based prices also gained a cumulative increase of $45-50/ton over the same period. Firmer PVC futures on the Dalian Commodity Exchange also played a role in increasing levels for conventional PVC.

The below graph prepared on ChemOrbis Price Wizard suggests that ethylene based PVC prices’ premium over acetylene based PVC narrowed to $30-35/ton as of the end of last week, down by around $20/ton when compared to two weeks ago.



A trader operating in Shanghai reported that some acetylene based PVC producers lifted their local offers by around $30/ton due to surging coal prices last week. “The coal market is recording rapid increases as supplies are reducing given a new round of environmental inspections conducted in Inner Mongolia. A shortage in water supply is also affecting the coal production, forcing producers to limit their output,” commented the trader.

A second trader noted, “We believe that ethylene based PVC prices will remain under pressure from the acetylene based PVC market which is likely to gain further ground on the back of firming coal prices.”

As for PP, on the other hand, players mostly believe that rising prices for coal have a limited impact on the market as demand is not supportive at all. “The recent gains in local PP prices have been triggered by firmer futures. We are feeling uncertain as to whether the market can retain a firm trend in the days ahead,” a trader opined.

Regarding the recent flood that hit the largest power plants last week in southern China, a few players said, “There has been no major impact on our business so far, yet we may face some transportation issues in the coming term.”
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