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Pace of PP, PE hikes in China and SE Asia slackens

by Merve Sezgün - msezgun@chemorbis.com
  • 18/03/2021 (10:10)
The polyolefin upturn in China and Southeast Asia has stretched into the fourth week after the Lunar New Year holidays. Although persisting supply limitations support import prices at high levels, the pace of gains has slackened this week amid mixed buying sentiment.

Converters in both China and Southeast Asia were reluctant to accept higher offers, and they either limited their purchases or preferred to stay sidelined and wait for a price correction.

Sellers in China continued to target higher-margin export outlets amid moderate demand at home. Players in other markets received more offers for Chinese origin PP or re-export HDPE and LLDPE film from China.

China inventories fall below 900k tons on increased exports, shutdowns

The two major domestic producers’ combined polyolefin inventories were reported at 870,000 tons on Wednesday, March 17. The level indicated a drop of around 65,000 tons compared to the beginning of the week.

Players mostly attributed lower inventories to increased exports, particularly for PP, and the turnaround season that kicked off early this month.

“The enthusiasm for fresh purchases is not high, and market transactions are weak inside China. Lower PP and LLDPE futures reflect the current buying sentiment. However, the turnaround season has kicked off, and a spate of plants are slated for maintenance shutdowns. Moreover, Chinese suppliers have focused on the export markets where better netbacks are achievable. These two factors offset moderate local demand,” they commented.

May LLDPE and PP futures on the Dalian Commodity Exchange posted combined decreases of $41/ton and $30/ton, respectively, on Tuesday and Wednesday.

Import PP prices stable to slightly up this week

After soaring 17-18% in three weeks after the holiday, homo-PP and PPBC inj. prices for all origins have remained stable or posted slight gains of $5-10/ton this week.

The weekly averages of prices have been assessed at $1270/ton for homo-PP raffia and $1375/ton for PPBC inj., both on CIF China, cash basis. At these levels, China still lags significantly behind other global markets. Hence, overseas suppliers are reluctant to step back on their offers to the country.

Striking a similar tone, import PP prices into Southeast Asia have seen no major changes so far this week. Players reported that the upturn more or less stalled after prices surged in previous weeks.

“Some converters secured material in the past weeks to hedge against further hikes. Therefore, they are not in a rush to make fresh purchases now. The current high prices are supported by tight supply, yet buying resistance is putting a cap on larger hike requests,” a trader in Vietnam explained.

Meanwhile, the ongoing presence of competitively-priced Chinese PP is another factor curbing the uptrend. Chinese homo-PP was offered at $1440-1450/ton CIF Vietnam this week, while offers for Middle Eastern origins stood at/above $1500/ton.

PE gains also slowed, though not as much as PP

The pace of hikes in the import PE markets has also slackened due to buyers’ growing resistance after the latest price surge. However, the slowdown is not as visible as it is in the PP market.

“The number of import offers is quite limited as overseas sellers are diverting their cargoes to higher-margin outlets. This is keeping the market firm given the country’s dependence on import sources for PE,” a trader in China commented.

The high ends of the overall LLDPE and HDPE film price ranges were largely stable from last week, while the low ends were higher. LDPE film, meanwhile, remained firm as it is the tightest product among all.

In Southeast Asia, tight supplies continued to support prices at high levels. Yet some buyers reported that suppliers have become open to negotiations for the first time after a long time.

“Sellers were standing quite firm on their offers in previous weeks. However, their stance has recently altered. We received an LLDPE film offer at $1350/ton CIF early this week, while the seller was willing to negotiate our bid at $1300/ton,” said a Malaysian converter.
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