China’s local PP, PE, PVC markets decline amid oil-driven falls in Dalian futures

In China, domestic PP, PE, and PVC markets showed a stable-to-lower trend during the week ending September 6, mainly due to notable decreases in Dalian futures amid falling oil prices. This downtrend overshadowed the initial signs of a seasonal recovery in polyolefin demand and further dampened the sentiment in PVC markets.

Crude benchmark futures traded lower for four consecutive sessions from September 3, as ongoing concerns about weakened demand from China and signs of a slowing US economy overshadowed OPEC’s decision to delay oil output increase. As of Friday, September 6, Brent crude futures were down by $1.63, or 2.24%, to settle at $71.06 a barrel, and WTI crude futures fell by $1.48, or 2.14%, to settle at $67.67. ChemOrbis Price Wizard shows that Brent hit a two-year-and-nine-month low, while WTI dropped to its lowest level since June 2023.

As a knee-jerk reaction to plunging oil, Dalian futures largely moved downhill during last week’s settlements. As of September 6, January futures on the Dalian Commodity Exchange recorded weekly losses of CNY213/ton ($30/ton) for LLDPE, CNY279/ton ($39/ton) for PP, and CNY263/ton ($37/ton) for PVC.

PVC prices mostly erase previous week’s gains

Local PVC markets inside China have grappled with unsupportive supply-demand fundamentals amid the weak property sector and ample inventories, making them more vulnerable to futures changes. The previous week witnessed some futures-driven hikes in PVC prices following a downturn that kicked off in early June. Nonetheless, these increases were mainly erased by futures’ recent slide just a week later.

Domestic PVC prices were assessed CNY100-150/ton ($14-21/ton) lower from the previous week at CNY5500-5800/ton ($686-724/ton without VAT) for ethylene-based K67 and CNY100-180/ton ($14-25/ton) lower at CNY5200-5400/ton ($649-674/ton without VAT) for acetylene-based K67, both on an ex-warehouse, cash, including VAT basis.

PE reverses course, PPH edges lower after 4-week stability

The recovering demand and manageable supply somewhat sparked upbeat sentiment in China’s polyolefin markets as the high season of “Golden September – Silver October” began. However, these factors were insufficient to prevent spot prices from following futures’ downward trajectory, with most players attributing the decline to bearish futures markets.

While LDPE film managed to hold on to the previous week’s level amid relatively tight supplies, LLDPE and HDPE film experienced a reversal, resuming their downtrend with renewed drops. The local prices were assessed stable from a week earlier at CNY9430-10350/ton ($1175-1289/ton without VAT) for LDPE film, stable to CNY100/ton ($14/ton) lower at CNY8000-8490/ton ($996-1057/ton without VAT) for LLDPE film, and CNY30-100/ton ($4-14/ton) lower at CNY7700-8270/ton ($959-1030/ton without VAT) for HDPE film, all on ex-warehouse China, cash including VAT basis.

In the meantime, the smallest decreases were observed in the domestic PP markets. The overall ranges for local prices were assessed stable to CNY50/ton ($7/ton) lower from the previous week at CNY7450-7700/ton ($928-960/ton without VAT) for homo-PP raffia and inj. and stable at CNY7700-7950/ton ($960-992/ton without VAT) for PPBC inj., both on the same term.

A trader based in Zhejiang commented, “The bearish trend in the futures market has impacted sentiment. Downstream demand is picking up slowly, as most buyers are still purchasing only based on immediate needs.”

Latest upticks in futures, oil yet to be reflected

Oil prices rose by $1 during Monday’s intra-day sessions, fueled by concerns over a potential hurricane approaching the US Gulf Coast and a recovery from last week’s selloff following weaker-than-expected US jobs data in August. PE and PVC futures on Dalian markets slightly recovered over the past two settlements, whereas PP futures moved further south.

However, players reported additional downward adjustments of CNY50-150/ton ($7-21/ton) in the domestic PP and PVC markets. “Prices are falling due to the previous drops in futures and oil markets. A supply overhang persists, and demand is still affected by the weak real estate sector. Our regular buyers actively ask for offers but maintain only essential replenishments,” said a PVC trader.

With opposite views on the seasonal polyolefin demand revival and lingering weakness in PVC’s supply-demand situation, the movement of oil and futures prices is likely to continue playing a crucial role in setting the tone of China’s domestic markets this week.