Will China's local PP market retain futures-driven gains prior to holidays?
In China, local homo-PP raffia and inj. prices have increased CNY100/ton($15/ton) so far this week to currently stand at CNY8000-8300/ton ($1095-1136/ton without VAT) on an ex-warehouse, cash including VAT basis. As for PPBC inj., prices have been flat to CNY50/ton ($7/ton) higher to stand at CNY8150-8400/ton ($1115-1149/ton without VAT) with the same terms.
Dalian futures up for 6th trading session
Driven by firm energy markets and restocking activity in China’s local polyolefin markets, Dalian futures settled higher for the sixth consecutive trading session.
From January 12 to January 19, May PP futures on the Dalian Commodity Exchange posted a cumulative gain of CNY666/ton ($103/ton).
A few traders said, “Major producers in China have adopted a firm stance on their PP offers in response to the uptrend in futures prices. However, buyers in downstream markets have mostly shown resistance to the recent hikes.”
According to market sources, meanwhile, two major Chinese producers’ overall polyolefin stocks were reported at 570,000 tons on January 19. The inventory level was down by 90,000 or 13.5% week over week.
Surge in COVID cases casts a shadow upon pre-holiday stocking
Chinese traders had hoped that restocking activity prior to the Chinese New Year holiday would prompt more active buying in the spot markets, but this has yet to be seen.
Chinese New Year will officially fall on February 12 in 2021 and be celebrated as a public holiday from February 11 to February 17.
“There has been some pre-Chinese New Year holiday stocking, however, buyers continue to purchase on a need basis. As demand is yet to follow, the amount of Dalian-driven price hikes has been limited so far. We think local PP prices will remain on a stable to slightly firmer trend over the near term,” traders also noted.
The reason behind buyers’ cautious stance is cited as the surge in new COVID-19 cases in China that resulted in lockdowns in four cities. This may also lead to an early closure of downstream factories and players’ sooner than anticipated leave for the holidays.
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