Trade truce with US sends China’s local PP, PE, PVC markets slightly higher

China’s local PP, PE and PVC markets have reacted to the temporary ceasefire in the China-US trade conflict as the agreement on withholding further tariffs for 90 days boosted Dalian futures and the energy complex.

First gains for local PP, PE prices after two-month downturn

The sentiment in the local polyolefin markets cautiously improved this week, with prices displaying a rebound after almost two months of steady losses, as the weekly average data from ChemOrbis Price Index shows.



The news pushed Dalian futures up

This was mainly attributed to the firming in futures prices after the trade truce. On December 3-4, PP and LLDPE futures on the Dalian Commodity Exchange posted total increases of CNY556/ton ($81/ton) and CNY70/ton ($10/ton), respectively.

A few traders noted, “Higher futures prices boosted the market sentiment and led to PP and PE gains in the local market after a long time.”

Recent recovery in oil also contributes to improved sentiment

Players also underlined the impact of the recent recovery in the energy complex. WTI crude on NYMEX have moved back up to around $52/bbl this week while it hit more-than-a-year low at around $50/bbl only a week ago following a steady decline since its peak in early October.

A seller opined, “We are still being cautious about our purchases, yet the sentiment is recovering this week in line with the recent gains in crude oil futures. We heard that overall polyolefin supplies in China are lower, which may also help prices.”

PVC was already firmer

A similar scenario was the case for China’s local PVC market. Although acetylene and ethylene-based PVC prices closed November with slight increases, the impact of the 90-day truce provided further support to the market. Plus, the government is expected to take stricter policies following the explosion at Hebei Shenghua’s PVC facility, which may result in production disruptions.

PVC futures on the Dalian Commodity Exchange witnessed a total increase of CNY145/ton ($21/ton) onDecember 3-4. A third trader commented, “Local prices have witnessed increases this week given firmer futures and higher crude oil prices amidst the positive outcome of the G20 summit.”

Will PP and PE hold on?

On the other hand, some players have doubts about the sustainability of this recent recovery, particularly for PP and PE. They believe that the positive impact of the truce might be around for a short period as the demand side is not strong enough to support further gains.