Is sentiment turning in China’s PP, PE markets again?
PP and PE players reported that local prices have decreased around CNY200-300/ton ($29-43/ton) so far this week in line with the weakening futures markets and slowing demand given buyers’ resistance to higher levels as well as the upcoming Chinese New Year holidays which will begin at the end of January.
A trader said that import PP and PE offers mostly remain stable; however, done deal levels are $20-30/ton lower from last week.
Another trader pointed out weakening demand as well as lower LLDPE futures prices as the main reasons behind the recent declines in prices. “Local LLDPE prices fell around CNY500/ton ($72/ton), following the LLDPE futures. We are expecting to see larger decreases in the days ahead as prices rose unhealthily in the last few weeks. Meanwhile, demand is slowing as well,” added the trader.
For the PP market, players similarly pointed out slower demand due to the approaching New Year holidays and the weakening futures prices. A trader in Xiamen said, “The recent decreases in the futures market was expected as prices had increased too much especially for PP last week. PP futures are higher than local PP offers in China, which is an unusual case as per the market traditions.
However, the main market driver is demand now. Although sellers try to clear their inventories in order to achieve a cash balance amidst the year-end closures, demand remains weak as players find current offers too high to accept. Previous higher prices were due to the futures’ trend rather than demand. Downstream players still source on a need-only basis and now traders are not buying as they have already built up enough inventory. Meanwhile, some local producers’ supplies are still tight and we are not optimistic regarding the market outlook.”
A second trader confirmed the downtrend in the PP market and commented that the market is expected to soften further as prices had increased enough in the previous period and buying appetite will slow down nearing the Chinese New Year holidays.
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