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Upward trend gains momentum in China's import PP, PE markets

by Pınar Polat -
  • 25/11/2020 (04:26)
In China, PP and PE prices, particularly for the homo-PP and LDPE grades, have continued to firm up at a relatively faster pace compared to previous weeks. Healthy demand, availability issues and rising Dalian futures have remained as the main factors supporting the markets.

Other factors accelerating the pace of gains are:

· More cost support from feedstock ethylene and propylene

· Stronger energy markets

· Soaring freight costs

· Positive economic developments

Saudi raffia offers touch $1100/ton CIF threshold

Import homo-PP raffia prices in China have been on a steady uptrend since the end of the National Day holiday. Firmer prices are mainly attributed to overseas suppliers’ limited availability to China, especially from Southeast Asia amid plant turnarounds.

Week over week, homo-PP raffia offers for Middle Eastern origins are up $60-70/ton to reach $1060-1100/ton CIF China, cash.

The last time prices for this origin touched the $1100/ton CIF threshold was June 2019.

Larger PP gains inevitable

Rising freight costs as well as the uptrend in spot propylene prices have also given an upper hand to PP sellers.

According to ChemOrbis Price Wizard, spot propylene prices on CFR China basis have increased $100/ton in the past three weeks to stand at $965/ton recently.

A trader commented, “Firmer oil markets and spot propylene prices are providing additional support to PP prices in China. Demand for import cargoes is particularly good due to a stronger yuan against the USD. Rising Dalian futures and limited import availability have already been keeping the market on the firm side in the past weeks.”

January PP futures Dalian futures on the Dalian Commodity Exchange have recorded a weekly gain of CNY505/ton ($77/ton) as of November 24.

In addition to two major local producers’ combined polyolefin levels falling below 600,000 tons, the news that China’s October industrial output is better-than-expected as well as the country’s involvement to world’s largest trade deal, the Regional Comprehensive Economic Partnership (RCEP) have also generated positivity in the futures market.

LDPE remains the strongest among other PE grades

Healthy supply-demand fundamentals, rising spot ethylene prices in Asia, stronger oil markets and firmer Dalian futures have also added to the overall firm sentiment in China’s PE market.

ChemOrbis Price Wizard also shows that spot ethylene prices on CFR China basis have climbed $220/ton in the past month to stand at $990/ton recently.

Gains in LDPE prices, meanwhile, have continued to outpace those of LLDPE and HDPE film considering the ongoing supply tightness as well as robust demand from the packaging and healthcare sectors.

Middle East origin LDPE prices are $30-40/ton higher on the week to stand at $1240-1260/ton CIF China, cash. As for HDPE and LLDPE film, prices have increased $10-30/ton on the week to stand at $980-990/ton and $960-980/ton with the same terms, respectively.

Another trader said, “LDPE is again the strongest among PE products. This is due to new capacities for LDPE units being way lesser than HDPE and LLDPE. In addition, there is some turnaround for LDPE plants which exacerbates the tight supply situation. Higher futures and crude oil prices are also supportive.”

January LLDPE futures Dalian futures on the Dalian Commodity Exchange have posted a weekly gain of CNY390/ton ($59/ton) as of November 24.

Gap between LDPE and LLDPE/HDPE widens

Discarding a short-lived softening in the second half of September, import LDPE film market in China has been on the firm side since late May with prices posting relatively larger gains this week.

After months of firming, Middle East origin LDPE film prices on CIF China basis are currently carrying a premium of $245/ton over HDPE film and $280/ton over LLDPE film prices with similar terms, the weekly average data obtained from ChemOrbis Price Index show.

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