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Sentiment cautiously rebounds in Asian PP, PE markets

by Pınar Polat - ppolat@chemorbis.com
by Esra Ersöz - eersoz@chemorbis.com
  • 18/09/2019 (15:59)
Heading into the second half of September, PP and PE prices across China and Southeast Asia found some support from skyrocketing crude oil futures early in the week before oil prices erased half of their gains late on Tuesday.

What happened on September 14?

State-owned Saudi Aramco’s facilities in the eastern part of Saudi Arabia were targeted by multiple disruptive drone attacks on the night of September 14, causing the biggest ever disruption to world oil supplies.

Immediate impacts of the incident

Following the incident, the international oil future markets closed with sharp gains of more than $8/bbl on Monday, September 16 and several Saudi producers were forced to reduce operating rates at their plants.

Uptrend reinforced for China’s local PP, PE prices

Having already displayed a slight recovery over the past week, local PP and PE prices in China have posted relatively more visible increases recently on the back of the rallying energy complex.

Futures drift higher before crude falls back down on Tuesday

Following crude oil, January LLDPE and PP futures on the Dalian Commodity Exchange posted notable total gains of CNY630/ton ($89/ton) and CNY388/ton ($54/ton) on September 16-17, respectively.

However, both WTI and Brent crude futures cancelled half of their gains on September 17, Tuesday’s settlements.

Local supplies lower

A few traders reported that two major Chinese local producers’ combined polyolefin inventories were lower this week as buyers in anticipation of further price gains intended to secure some cargoes prior to the approaching Golden Week in early October.

Buyers seem more interested in stock replenishment

Except for showing some short-lived pick-ups, demand for PP and PE applications has been weak since the end of the Chinese New Year holidays in February.

This week, the number of done deals has improved as the recent gains in local polyolefin prices up to CNY300/ton ($42/ton) have pushed buyers to urge for some purchases.

Import PP, PE offers in China on hold with eyes on oil

Although local PP and PE prices in China have responded to the jump in crude oil futures immediately, import prices, which hit 10-year-lows for many PE products and 2-year-lows for homo PP in early September, have followed a largely steady trend so far.

Some sellers have withheld their offers in order to see a clearer picture of the market before taking any steps. Others, meanwhile, have reported that notional market levels for PE have already increased by $20-30/ton.

The cautious mood across import markets has mostly prevailed given the impact of the weak yuan amidst the ongoing trade dispute with the US and China’s weak economic data.

SEA PP, PE markets give signs of an upturn

The recent spike in crude oil futures has created firmer expectations in Southeast Asian PP and PE markets even under the shadow of thin buying interest.

A Singaporean trader opined, “We expect PE prices to climb by $30-50/ton in the days to come. Yet, we are still concerned about the sustainability of any possible uptrend as demand across regional markets remains limited.”

Downward correction in oil may cause jitters

On top of limited demand and economic concerns, the recent downward correction in oil prices is also triggering questions about the sustainability of the recent improvement in market sentiment for PP and PE among players.
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