Players differ in state of demand in China’s PP, PE markets

China’s polyolefin markets have remained firm since the beginning of July in light of some supportive catalysts, including firm upstream and futures values. When it comes to demand, on the other hand, there have been some different voices with some players underlining slightly better demand while others specifying that the recovery is still slow to provide long-term support to the markets.

The Chinese government’s efforts to revive its economy through various monetary stimulus measures have indeed bolstered domestic spending and consumption to some extent. This also justified the recent price increases that have been in place since July. However, players have still been divided on the actual impact of these moves to boost demand for polyolefin products.

Some see continuous signs of demand recovery

Despite year-over-year weakness, demand has experienced an incremental improvement not only when compared to the previous month but also the first half of the year, according to some players. That was mainly attributed to the positive influence of the PBOC’s fiscal boosters.

A trader said, "Demand continues to increase, as reflected in the uptrend of local PE and PP prices as well as the higher import offers over the past few weeks, as the effects of the PBOC’s multiple monetary policies have deepened across the economy."

Contributing to the macroeconomic effects was the upcoming high season, which also lured buyers into the markets for pre-stocking, albeit at limited volumes, they argued.

Others argue demand recovery falls short of expectations

Some players highlighted the fact that the PBOC’s policies have yet to make their presence felt in key sectors, including polymers. "The government introduced a series of policies to revive the economy, but the effect remained below expectations so far, with little influence on the plastic industry," said a Shanghai-based converter.

Deepening real estate crisis fuels demand concerns

The Evergrande and Country Garden cases have also exacerbated the concerns regarding the state of Chinese economy recently.

Weak economic data has kept clouding market sentiment, leading to subdued buying enthusiasm. A source from a Chinese producer underlined, "Converters and distributors are only buying their needs since China’s consumption, exports, and investments are all down. The recent real estate policy has not had much impact on the economy yet."

Sellers reported that buying resistance has continued, particularly towards the price levels that form the high ends of the market. A trader reported, "Trading companies are taking the opportunity to quote higher prices on firm costs. However, downstream buying activity has still been driven by essential needs, leading to resistance to transactions at higher levels."

Will the peak season result in better demand?

Although the government’s efforts haven’t yet resulted in a meaningful demand recovery, they have in fact laid the groundwork for demand not to erode further. The buying sentiment is therefore likely to have room for additional gradual revival in the interim, considering macroeconomic influences on the one hand and the forthcoming “Golden September, Silver October” peak season on the other. As some players put it, “The demand side appears to improve by September thanks to the peak season.”

During the week that ended on August 25, the overall import price ranges were standing at $840-930/ton for homo-PP raffia and inj., $940-1000/ton for LDPE film, $920-990/ton for LLDPE film, and $950-1010/ton for HDPE film, all on a CIF China, cash basis.

As for domestic markets, last week’s overall price assessments stood at CNY7400-7600 ($901-926/ton without VAT) for homo-PP raffia and inj., CNY8470-9200 ($1032-1122 without VAT) for LDPE film, CNY8200-8560 ($999-1043/ton without VAT) for LLDPE film, and CNY8400-8900 ($1023-1084/ton without VAT) for HDPE film, all on ex-warehouse China, cash including VAT.