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PP, PE supplies rise in China; demand lags behind expectations despite peak season

by Merve Sezgün -
  • 02/09/2021 (03:10)
China’s local polyolefin markets saw inventories at the two major producers rise on Wednesday, which came as a surprise to players as stock levels rarely increase in the middle of a week. Higher inventory levels were attributed to a combination of new capacities and plant restarts.

The two major producers’ combined polyolefin supply was reported at 760,000 tons on Wednesday, September 1. It was up by 35,000 tons from the previous day and 80,000 tons from a week earlier.

Overall demand, meanwhile, has remained below expectations despite the fact that the country’s “Golden September, Silver October” peak season has kicked off.

Players: Domestic stocks may rise sharply in Sep

“Local inventories in China are likely to see a significant increase in September due to more plant start-ups and less turnaround plans. PP and PE prices may face pressure from ample supplies and they may fail to head north this year as they traditionally do during the high season,” a few players operating in the polyolefin markets noted.

Homo-PP raffia prices on ex-warehouse China basis have tracked a volatile trend lately, but they are down by around 10% compared to March 2021 when they hit a more than two-year high.

Local LLDPE and HDPE film prices have followed a similar trend. Data from ChemOrbis Price Index reveal that the weekly averages of prices are down by around 7-8% from their March peaks.

Local PP PE prices - China

LDPE is an exception

LDPE is not included in the expectations that supply will increase further in the upcoming term. On the contrary, players anticipate that LDPE availability will remain tight since new capacities are mostly for LLDPE and HDPE.

“LDPE prices continue to increase amid tight supply in both import and local markets. Demand for LDPE, meanwhile, is better when compared to other PE products,” commented a trader.

According to ChemOrbis Price Index data, local LDPE film prices on an ex-warehouse China basis have been mostly increasing since the second half of June. The market is currently at its highest level since early May.

Overall demand still not up to expectations

Sellers reported that buying resistance continued particularly towards the price levels that form the high ends of the market.

“The high season has failed to boost the buying sentiment so far as demand improvement is still not meaningful enough to absorb the current price levels. Among all polyolefin products, HDPE film continues to see the weakest demand. LDPE remains as an exception due to its tight availability, but even LDPE demand is still not up to expectations,” a few traders noted.

A seller also said, “Downstream players in China are not in a hurry to build stocks due to ample availability in the domestic market.”
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