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Pre-holiday lull dilutes impact of bullish factors in China’s PE market

by Merve Sezgün -
  • 28/01/2019 (08:17)
In China, import PE prices continued to chase a mostly steady trend last week despite a series of supportive factors. Players reported that trading activities retreated further as most buyers already adopted a waiting stance given the approaching holiday.

Week-long Lunar New Year holiday falls in early February this year

China will be on holiday on February 4-8 for its Lunar New Year.

A global trader opined late last week, “Done deals are very limited since many PE buyers have retreated to the sidelines, postponing their next round of purchases to the post-holiday period.”

Many concurred that the pre-holiday lull has diluted the impact of several strong factors in the PE market, including limited supplies and rising ethylene prices.

Domestic supplies remained limited

Traders noted that overall PE supplies in the local market remained limited and some suppliers tried to maintain a firm stance on their offers by citing their low inventory levels last week.

“However, tight availability has failed to push prices higher as demand is fading given the upcoming holiday while the futures market has been weak recently. The market is very quiet now,” a trader based in Ningbo commented.

Spot ethylene moved back above $1000/ton

According to ChemOrbis Price Wizard, spot ethylene prices on CFR Far East Asia basis climbed back above the $1000/ton threshold last week after they registered sharp increases owing to good demand from China. Data indicate that the weekly average of spot prices currently stand at its highest level since late November.

Price gap between import PE and ethylene narrowed

Data from ChemOrbis Price Index suggest that the price gap between China’s import PE market and spot ethylene has significantly decreased by around $130-150/ton in the past two weeks following the sharp gains in ethylene prices.

Currently, the weekly average of import LDPE film prices on CFR China basis is carrying a premium of $10-15/ton over spot ethylene prices on CFR FEA basis. As for LLDPE and HDPE film, the premium over ethylene is around $35/ton and $75-80/ton, respectively.

Yuan’s appreciation had limited impact on import PE demand

The yuan’s surprising recovery over the turn of the year supported the sentiment in the import market to some extent. Overseas suppliers approached the Chinese market with renewed confidence for their February pricing.

Still, import PE offers did not witness any major upward movements since most buyers continued to believe that the post-holiday outlook was still uncertain amid China’s cooling economy.

According to data published by National Bureau of Statistics of China, the country’s economic growth for the full year of 2018 came in at 6.6%, marking the slowest pace in 28 years.
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