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Mixed expectations voiced on China’s post-holiday outlook

  • 09/10/2017 (04:24)
As market activities are expected to resume gradually this week following the end of the National Day holiday in China that took place in the first week of October, Asian players have been expressing mixed expectations for the post-holiday period although all polymers markets had entered the holiday on a softening trend.

Some players anticipate a strong return on the back of the ongoing and the upcoming maintenance shutdowns as well as a possible demand revival in the post holiday period. Others, however, hold onto softening expectations, underlining the volatility of the energy complex and the futures market.

In the PE market, players entered the holiday on a stable to softer trend mainly due to weakening demand as well as fluctuating LLDPE futures. PE players mostly preferred to sideline until the market direction becomes clear after China’s comeback. A Chinese trader noted, “We expect prices to slightly rebound after the holiday given the ongoing manufacturing season and delayed shipments from Iran.” Firm ethylene prices in Asia as well as the strength of the energy complex also supported the firmer expectations on the traders’ side in the pre-holiday period. However, Asian ethylene prices softened and crude oil prices cancelled some of their earlier gains when Chinese players were away for holidays last week. The fading support from the upstream may weigh down on PE prices, others argue.

As for the PP market, the holiday started with decreases given limited demand, increasing local supplies as well as the volatility of the futures market. These factors also contributed to the softening expectations for the post-holiday period. However, some players do not exclude the possibility of a rebound, citing the ongoing import tightness and the shutdowns. A Vietnamese trader operating in the Indonesian market commented, “Some players are still hopeful that the Southeast Asian market may find support from a possible revival in the nearby Chinese market after the end of the holiday amid the approaching peak season.”

When it comes to PVC, the sentiment in China had already softened ahead of the holiday in the midst of slower demand and fluctuating futures. Not only National Day holiday, but also the upcoming Diwali holiday in India weighed down on expectations for PVC demand and accordingly on prices. An Indian converter noted, “We think the peak PVC consumption will take place after the end of the Diwali holiday, which will take place in the second half of October.” A trader in Malaysia opined, “Rumor has it that the Taiwanese major may decrease its offers for November. But we think that we still need to wait for China’s return for a clearer market direction.” Others, meanwhile, are pointing to the Taiwanese major’s already firm stance in October and do not think that it will cut its offers for November right before the peak season in India.

In the styrenics markets, PS and ABS prices followed lower styrene prices in Asia ahead of the holiday, which is likely to extend into the post-holiday period. An Indonesian trader noted, “ABS demand remains limited to buyers needs. However, we expect prices to retreat further after the week-long holiday in China.”

For PS, another Indonesian trader said, “End users are not rushing to purchase raw material as they expect to see more competitive PS offers later in October considering the fading support from monomer markets.” However, some players are also pointing to the possible impact of the ongoing and the upcoming shutdowns in several regional producers’ plants, wondering whether they will restrain the expected softening.
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