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Soaring energy disperses pre-holiday expectations in China’s PP, PE markets

  • 12/10/2016 (03:32)
In China, PP and PE players have started to return to their desks from a week-long National Day holiday in a firm atmosphere. As opposed to players’ pre-holiday expectations centering on a mostly soft note, initial prices emerged with increases this week on the back of rebounding crude oil markets coupled with higher PP and PE futures.

Crude oil prices on NYMEX broke above the $50/barrel threshold on October 6 for the first time since June while prices settled with a $1.54/barrel increase at $51.35/barrel on October 10.

Looking at futures markets, January LLDPE futures on the Dalian Commodity Exchange closed CNY210/ton ($31/ton) higher on October 11 while PP futures increased by CNY167/ton ($25/ton) on the same day.

Several sellers operating in China reported that the major local PP and PE producers CNPC and Sinopec implemented increases on their initial post-holiday domestic offers due to their reduced inventories coupled with buyers’ improved appetite for replenishment. Meanwhile, players highlight that the rising trend is more visible in the PE market which receives support from the ongoing tightness for LDPE and LLDPE.

A trader opined, “In the local market, PE prices are already up by around CNY300/ton ($45/ton) when compared to pre-holiday levels in line with improving demand. For PP, however, we think that the recent gains will prove unworkable soon as a mostly soft trend is expected for the last quarter amidst comfortable supplies and frail demand.”

A Hong Kong-based seller commented that demand from converters is yet to revive while traders are sourcing materials in anticipation of seeing firmer levels in the days ahead. “Major domestic producers already raised their offers. LDPE sees the strongest demand among other PE products and PP due to its tight availability. Following the end of the National Day holidays, local prices increased by around CNY200-300/ton ($30-45/ton) for LDPE film and by CNY150/ton ($22/ton) for LLDPE and homo-PP,” he stated.

A third seller affirmed improving demand for both PP and PE following the end of the holidays. He said, “Despite a firm start, we think that the PP market is not strong enough to absorb additional gains in the face of ample supplies.”

Another trader in Shenzhen noted that he was already expecting to see firmer PE levels after the holidays, yet he was surprised with PP increases. “Local PE prices are firming on the back of limited LDPE supplies which also supports sentiment for other PE grades although demand for LLDPE and HDPE is not that great. For PP, we were expecting to see lower prices following the holidays given comfortable supplies and poor demand. However, we see that traders are holding onto their future materials in order to improve end users’ buying appetite,” he further commented.

In the import markets, players reported a stable to firm trend on initial post-holiday offers. A Xiamen-based trader who offers PP and PE for several overseas origins reported that prices opened the post-holiday period with visible increases for LDPE film and smaller gains for other PE grades as well as PP.

“The market is currently supported by several factors, including the agricultural season, firmer futures and energy markets, low inventory levels of China’s major domestic producers as well as a better than expected Chinese economy. These factors are supporting replenishment activities on the buyers’ side. Demand is especially good for LDPE,” the seller stated.

A source from a global polyolefin producer reported that they have been receiving a good number of inquiries from buyers in China for the last couple of days. The source noted, “Demand is likely to help sentiment firm for the near term while PE seems to be stronger than PP given its ongoing supply concerns.”
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