PP, PE players in China, SE Asia discuss post-CNY outlook

With overall market activity slowing ahead of the Chinese New Year holiday, polyolefin players in China and Southeast Asia, where demand has remained persistently weak, have begun sharing their expectations for the post-holiday market outlook. This year, the holiday falls in the final week of January, with markets traditionally resuming activity well after their official conclusion.

Holiday mood sets in: Early shutdowns at downstream factories

Several players in China and Vietnam reported that many downstream factories have decided to begin their holidays early. A Vietnamese converter remarked, “We expect buying interest to decline further this week as the Spring Festival draws near. Weak end-product demand has left us planning for an early closure for the Lunar New Year.”

With sluggish downstream markets and low end-product prices, converters are avoiding new purchases or stockpiling. Another buyer, also in Vietnam, noted, “We don’t see many offers this week. Most players are in a holiday mood, and demand remains weak.”

A Chinese trader, similarly, pointed to fading demand, saying “Production is mainly focused on fulfilling existing orders.”

Import offers to the Southeast Asian countries are reportedly few and far between, signaling a tug of war between buyers and sellers, as sellers are not willing to offer further discounts while buyers have already been resisting to purchase additional volumes despite low price levels. “We anticipate a downtrend after the holidays, so we are keeping our purchases tied to immediate needs. Even local buyers don’t opt to maintain high inventories or replenish in advance,” noted a Vietnamese trader.

A Malaysian converter also reported that they didn’t receive any offers for the current week. “Our LLDPE inventories are low, so we might need to replenish some material. Regarding the HDPE line shutdown at one of the major producers, it has not affected our business much as we can source from other suppliers. Also, demand for our end-products remains stable,” added the converter.

Demand weakness likely to persist

A source from a Middle Eastern producer shared insights on ongoing challenges, saying, “We have extra stock for January and February shipments due to weak demand. Price increases are difficult because buyers are not willing to accept changes and are not rushing to build up inventory. Many still have leftover material, as their customers placed fewer orders, and year-end demand didn’t meet expectations.”

The source added that even if there’s potential for price increases later, buyers remain uninterested in purchasing in advance.

Another Chinese trader highlighted the current dynamics, stating, “Although futures prices have seen slight increases, factories are maintaining low inventories ahead of the Chinese New Year. Spot prices have stabilized, while ocean freight rates to Vietnam have dropped significantly. Additionally, the RMB’s recent depreciation has opened up export opportunities, driving a notable increase in export volumes.”

The trader further commented on PP raffia FOB China prices, which are now in the range of $910-930/ton, adding, “From a fundamental perspective, new capacity additions in the first half of the year will continue to weigh on polyolefins. Even with macroeconomic factors in play, any price increases will likely remain limited, fluctuating within the current range.”

Supply pressure set to rise post-holiday

In China, the combined polyolefin inventories of the two major domestic producers were reported at 580,000 tons as of January 14, roughly 40,000 tons below the level seen a year ago. However, inventories are expected to rise sharply during the Lunar New Year holiday as production continues while trading activity pauses.

Additionally, new capacity additions planned for the first quarter in China are set to exacerbate supply pressure. This surplus is likely to create significant challenges for the post-holiday market, with ample availability adding to the already sluggish demand. “Although the number of maintenance shutdowns will see some increases this week, the gradual impact of newly commissioned units and weak downstream demand is expected to keep prices fluctuating within a weak range,” said a source.