China PP, PE held cautious gains last week, while early-week signals turn mixed as holiday nears

China’s PP and PE markets maintained a cautiously firm tone in the week ending January 30, as prices selectively extended earlier gains. Players noted that the initial recovery had already taken shape from late December to early or mid-January, with the latest week marked by a measured continuation of this uptrend, supported by firmer futures and pre-holiday restocking. While demand remained restrained, slightly improved trading activity reinforced expectations of limited near-term upside.

Local markets see visible hikes; import, export gains still limited

Last week, local HDPE prices rose by CNY200-250/ton ($29-36/ton), while LLDPE film gained up to CNY170/ton ($24/ton). LDPE remained stable for the second straight week. On the PP front, local homo-PP raffia and injection grades increased by CNY150-400/ton ($22-58/ton), while PPBC injection prices climbed CNY300/ton ($43/ton).

Import homo-PP raffia and injection grades rose slightly by up to $10/ton, with ME offers also edging higher. PPBC injection imports increased $10-20/ton, while export homo-PP raffia and injection saw gains of $20/ton. Both imports and exports continued to recover from historical lows, with prices still considered relatively low, leaving room for potential increases.

Import HDPE film climbed $10-30/ton, while LDPE and LLDPE imports were mostly stable, with Middle East offers showing slight increases. Hikes in HDPE marked the third consecutive week of gains, while LDPE and LLDPE remained on hold after earlier two-week uptrends.

Pre-holiday demand brings cautious optimism

Traders largely reported cautious optimism ahead of the long holiday. A local PE trader commented, “Prices rose due to futures gains. Supply is long, but demand is slightly better due to bullish sentiment and some restocking.” Another noted, “Local product is still more competitive than imports, so buyers prefer domestic materials. Supply is ample, but producers are adjusting rates to support the market.” Overall, PE supply and demand indicators softened slightly, with some factories beginning holiday closures, although restocking was expected post-holiday.

PP market sentiment also showed positive momentum. One trader remarked, “Local and import PP prices ticked higher as upstream inventory remains low. Buyers are restocking for the Lunar New Year, and downstream operating rates are slowly ramping up.” Export offers increased, with Southeast Asian buyers showing selective interest, while domestic homo-PP and PPBC injection prices continued their rebound from multi-year lows. Market participants anticipated firm near-term prices, although extended gains could be limited by cautious downstream demand.

Cost and inventory dynamics justify cautious gains

On the supply front, as of January 30, CNPC and Sinopec inventories stood at 445,000 tons, up 10,000 tons from the previous day but down 55,000 tons from a week earlier. The day-on-day data confirmed the slowdown in consumption towards the end of the week, but combined stocks broke below the 500,000-ton mark due to earlier restocking.

Upstream values for PP and PE continued to follow opposite paths for the third straight week. Spot ethylene CFR China declined $10/ton to $700/ton, while spot propylene rose $10/ton to $820/ton. Meanwhile, Brent crude futures, surging above the $70/bbl mark on the January 29th settlement, supported the recent price hikes across the chain. Futures also contributed to market sentiment, with May LLDPE and PP contracts gaining CNY263/ton ($38/ton) and CNY272/ton ($39/ton), respectively, on Thursday, January 29, when the price assessments for polyolefins were made.

Early-week signals turn mixed

Early indicators for the current week pointed to a more cautious tone as the Lunar New Year drew closer. As of February 2, combined inventories at China’s two major polyolefin producers jumped to 600,000 tons, up 155,000 tons from the previous working day.

Macro-financial signals also softened. ICE March Brent crude was last settled at $70.69/bbl on January 30, but prices opened the new week sharply lower in intraday trading, seeing losses of nearly $4/bbl at one point, dampening near-term cost support expectations.

Futures weakened accordingly. On Monday, February 2, May LLDPE futures on the Dalian Commodity Exchange settled CNY154/ton ($22/ton) lower at CNY6,945/ton ($884/ton without VAT), while May PP futures fell CNY141/ton ($20/ton) to CNY6,774/ton ($862/ton without VAT). Players noted that while some last-minute restocking may still emerge ahead of the holiday, rising inventories, falling futures, and early downstream plant closures could increasingly cap further price upside in the days ahead.