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Sentiment firms up in China’s PP, PE markets on higher energy prices

by ChemOrbis Editorial Team -
  • 05/07/2012 (09:52)
After crude oil futures on NYMEX hit $77 per barrel in the last working days of June, they jumped back up in the following days and climbed up by more than $10/bbl to above $87/bbl early this week. Asian naphtha prices followed suit and gained more than $50/ton in the same time frame. Spot ethylene and propylene markets were responsive to rebounding energy costs as they respectively posted $70/ton and $15/ton increases in the first three days of this week.

These bullish developments in the energy markets have found an immediate reflection on China’s PP and PE markets this week as sellers have gained confidence and taken a firmer stance with their offers. Both markets stabilized in China as of the second half of June after a long downward trend that had been in place since mid April.

In the PP market, domestic producers have raised their offers by CNY200-300/ton ($31-47/ton), taking support from the rising upstream costs. “We are also feeling free from inventory pressure," commented a source from a domestic producer. Import PP offers to China have moved higher this week as well. Several traders and suppliers reported lifting their offers in accordance with the firming sentiment. A South Korean producer said, “We have sold PP $5-30/ton higher on the month for July shipments. We are planning to hold our offers firm for now despite slow sales.” Traders who followed suit also reported seeing resistance from buyers against higher offers.

A distributor expressed his concern about the direction of prices, saying “I am not sure what will unfold in the upcoming days in the PP market as crude oil prices are volatile.” A trader in Shanghai commented, “The PP market may remain firm over the near term based on the gains of energy markets; however, it may not last long if demand remains disappointing in the downstream chain.”

When looking at the PE market, a very similar picture is being drawn. Domestic producers are adjusting their offers upwards on a daily basis upon improved buying interest. “We are receiving increasingly more inquiries. We think that the firming trend will last for a while,” a source from a domestic producer commented. Overseas producers are taking a firmer stance with their offers as well. Offers from producers are stable to $25-30/ton higher on the week. Some producers have even withdrawn their offers after concluding deals in anticipation of further increases in the days ahead.

On the distribution side, players are raising more cautious comments. Even though they agree about the firm expectations for the short term, they are skeptical about the sustainability of the firming trend. “We have revised our PE offers in line with the market, but we are seeing stiff resistance from buyers,” commented a distributor.

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