Signs of optimism in China PP and PE markets, but caution remains

In China, sentiment in the polyolefin markets has displayed a cautious improvement since late last week. Firmer Dalian futures prices and the boost oil got from the government’s decision to ease some of its Covid-19 restrictions for travelers have generated some positivity, leading to a stable to slightly firmer trend after a long term of downturn.

Sustainability mooted

Meanwhile, this is not the first time China’s polyolefin markets have signaled some recovery. Back in mid-September and right after the week-long National Day holiday in early October , there were some attempts to hike prices albeit at limited amounts, but they were all proven short-lived mainly due to a lack of support from the demand side. This may also be considered as a factor behind players’ cautious approach to any improvement.

PP

PP prices in China have been on a mostly downward trend since early Q2, mainly driven by sluggish demand. ChemOrbis Price Wizard shows that before the recent revival, the weekly averages of both import and local prices were standing at their lowest levels since June 2020.

A trader reported that their offers for Middle East origin raffia were $20/ton higher towards the middle of the week at $880-890/ton CIF China, cash basis. “Prices have been slightly up from their almost two-and-a-half-year lows due to firmer future prices and the cost support,” he commented. January PP futures on the Dalian Commodity Exchange posted a weekly gain of CNY134/ton ($19/ton) as of November 16.

Elaborating further, he added, “The loosening of China’s covid policy has pushed suppliers to renew confidence. Still, demand is not good amid the off with buyers continuing to buy only for their needs. We think that the market is likely to move sideways over the near term.”

Homo-PP raffia and injection prices are assessed stable from last week at $870-890/ton CIF China, cash basis and higher by CNY50/ton ($7/ton) higher at CNY7,850-8,000/ton ex-warehouse China, cash including VAT ($961-980/ton without VAT).

PE

Like PP, China’s PE markets have been mostly on a downward trajectory since early April, recently with rising import availability adding to persistently poor demand. As a result of this, import PE prices tested new thresholds last week, with LDPE film prices breaking below $1000 mark while HDPE and LLDPE film prices below $900/ton mark were reported.

This week, on the contrary, import PE prices have taken a break from their losses amid some positive signals.

“PE prices are largely stable this week with support of the futures prices’ rebound. Although crude oil prices have been fluctuating, the ease of China’s strict zero-covid policy and the G20 summit is giving helping the market sentiment to some extent. Both PP and PE are holding well even though it is the off season."

January LLDPE futures on the Dalian Commodity Exchange were CNY115/ton ($16/ton) higher on the week of November 16.

PE prices of the Middle East origin are standing at $980-1000/ton CIF for LDPE film, $890-910/ton CIF for HDPE film, and $890-900/ton CIF for LLDPE film. Local prices are also following a stable trend, standing at CNY8660-9100/ton ($1061-1176/ton without VAT) for LDPE film, at CNY7840-8200/ton ($960-1004/ton without VAT) for LLDPE film, and at CNY7920-8300/ton ($970-1017/ton without VAT) for HDPE film, all on ex-warehouse China, cash including VAT basis.

Demand yet to keep pace with the improvement

Still, it is better to remind that the uncertainty over China’s Covid policy lingers. The positivity generated around the loosening of some restrictions has been partially overshadowed by the recent surge in the number of new cases as this week goes by.

This keeps the demand front under pressure, with buyers remaining vigilant when it comes to new purchases.