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Intensifying trade war adds to bearishness in China’s local PP, PE markets

by Pınar Polat -
  • 15/05/2019 (04:16)
The re-escalated trade tensions have recently added further pressure on China’s local polyolefin markets. This week, LLDPE prices have hit a 10-year-low while HDPE film prices have seen the lowest levels of the two years. LDPE and homo-PP, meanwhile, recorded relatively smaller losses.

How did trade tensions come to the fore again?

Months-long negotiations between China and the US officials appeared to have no end in sight, considering the following steps taken by both sides recently.

May 5

President Trump voiced his plans to increase the tariffs on $200 billion worth of Chinese of goods from 10% to 25%, and implement a fresh 25% tariff on an additional $325 billion of goods.

May 10

The US officially increased the 10% tariff on $200 billion of imports from China to 25%.

May 13

The Chinese Ministry of Commerce stated that tariffs on more than 5,000 US products worth $60 billion will be raised starting from June 1, in retaliation for the US administration’s move.

PP, LLDPE futures plunge

PP and LLDPE futures have immediately responded to the latest escalation of the trade tensions, witnessing remarkable losses.

September LLDPE futures on the Dalian Commodity Exchange posted a week over week loss of CNY495/ton ($72/ton) or 6% as of May 14. September PP futures were also down by CNY427/ton ($62/ton) or 4.9% from last week on the same day.

Frail demand, high stocks already a burden for local markets

Local PP and PE markets have also been under pressure from the weakness in demand while the supply side is also not promising.

Local polyolefin supplies in China have remained ample for the past three months, since the end of the Chinese New Year.

Local PE markets dip to multi-year lows

The aforementioned bearish factors have pushed China’s local LLDPE market to its lowest levels not seen since early January 2009, according to the weekly average data obtained from ChemOrbis Price Index. Players concur that LLDPE is the weakest one among other PE products in terms of demand.

As can be seen in the chart above, the local HDPE film market in China also hit a two-year low on a weekly average while local LDPE film prices reached their lowest levels since December 2018.

Local PP market also at the lowest of 6 months

A similar case was in place for the local homo-PP market. Prices retreated by CNY200-250/ton ($29-36/ton) from last week given weak supply-demand dynamics while the weekly average indicated the lowest level in the past six months.
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