The upward trend that had been in place in China’s PP and PE markets since mid December gained speed following the end of the Chinese New Year holiday at the beginning of February, as per ChemOrbis. However, the resistance against rising prices built on the buyers’ side has grown, forcing traders and distributors to step back from their offers. Many resellers express losing confidence over the near term market outlook while some producers prefer to withdraw their offers rather than give into discounts as energy markets and feedstock costs are sustaining their bullish run.
In the PE market, softer prices first surfaced in the local market by late last week with distributors showing willingness to offer discounts for firm bids as persistently poor demand together with the falling futures market have added to their sales pressure. Most distributors say that they prefer to do back to back business without any plan to replenish stocks for the near term. Converters have already been repelled from the market since they mostly report receiving insufficient orders from their end product markets. On the other hand, the firmer market level is still supported by high upstream costs. A distributor commented, “Although the overall sentiment is bearish this week and we are under sales pressure, this softening may not be long lasting considering the energy complex and rising ethylene costs.” Indeed, a Middle Eastern producer has applied a brand new increase on its LDPE and LLDPE offers to China for February, blaming higher costs and insufficient availability. Nevertheless, a company source said, “We have had to withdraw our recently hiked offers as we have faced stiff resistance. We have received bids standing US$60/ton lower than our offer levels. Even though we cannot make sales for now, we prefer to hold onto our offers instead of surrendering to price cuts.” The PP market is drawing a similar picture too. Most distributors report holding their offers steady for this week but they all say that they are open to agree on discounts to speed up their sales amidst thin buying interest. A distributor remarked, “Even though I have held my offers stable, I am telling my customers that I am open to negotiation for every account.” Some distributors also commented that the monetary easing earlier expected will likely be delayed in China due to the need to fight higher inflation. “This will inevitably result in tight credits for buyers and demand will fail to recover,” they argue. Regarding the import market, a couple of traders said that the import offers they have received this week are softer now that rapid increases have pushed buyers away from the market. One of them mentioned, “Our stocks are already high and we have no intention to replenish stocks in the near term. We prefer to take a waiting stance in anticipation of softer prices to come.” Another trader, on the other hand, commented, “We are not planning to cut our offers for now in the midst of high costs and low stocks. Although we are suffering from slow sales, I don’t think that prices will drop substantially as long as crude oil and propylene costs remain at the currently high levels.”