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Post-holiday hikes carry China homo-PP market to 1-year high

by Merve Sezgün -
  • 15/10/2020 (04:11)
China’s lengthy National Day holidays ended last Friday and PP players have been gradually returning to their desks since then. The post-holiday scene has been firm so far, with both local and import suppliers raising their offers amid reports that buying activity is brisk in China.

Data from ChemOrbis Price Index suggest that homo-PP raffia prices on CIF/ex-warehouse China basis have reached their highest levels in around a year on the heels of suppliers’ post-holiday hikes.

The weekly average of import homo-PP raffia and injection prices for overall origins stands at $985/ton CIF China, cash currently.

As of Wednesday, October 14, homo-PP raffia and injection offers for Middle Eastern origins, meanwhile, were reported at $960-980/ton CIF, cash basis. These levels indicated increases of $35-40/ton when compared to the pre-holiday week.

Rising PP futures boost demand; inventory levels decline gradually

January PP futures on the Dalian Commodity Exchange recorded a cumulative increase of CNY385/ton ($57/ton) from October 9, the first trading day after the holiday, to October 14.

Players reported that rising futures have encouraged PP buyers in China to return to the market and replenish their stocks.

The two major Chinese producers’ overall polyolefin inventories were standing at 895,000 tons on October 9, the first official business day after the holiday. According to players, the producers’ post-holiday inventory levels were lower than expected.

The inventory levels were down to 800,000 tons at the start of this week, while they declined further to be reported at 725,000 tons as of Wednesday, October 14.

“Major Chinese producers raised their PP offers right after the holiday amid rising futures.

Regarding supply, there isn’t a significant number of turnarounds going on now and new PP capacities are coming up. However, the two major producers’ inventories are declining thanks to active buying. Hence the expected post-holiday supply pressure has been dissipated so far,” a trader commented.

High propylene prices provide cost support

According to ChemOrbis Price Wizard, spot propylene prices on CFR China basis currently stand at $910/ton. Despite a slight drop of $5/ton from two weeks ago, spot prices continue to hover around their highest level since early 2020.

A few players commented that high propylene prices have also supported the post-holiday PP sentiment.

“We have raised our homo-PP and PP copolymer offers to China by $20-30/ton this week as firm monomer prices are lending support to the PP outlook for the second half of October,” a source from a South Korean producer said.

Players: Near-term outlook is bullish, yet new capacities cloud longer-term

Most players believe that the near-term outlook for PP is bullish on the back of healthy China demand and firm costs.

“The upward trend should be supported at least until the end of October as the high season still continues. PP prices might see a fresh round of gains next week,” a trader said.

Several other players concurred but added that the upcoming PP capacities in China are clouding the longer-term outlook.

“If new capacities are launched in the last quarter of the year as planned, increasing supplies may put pressure on the market,” they noted.
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