2013 pre-holiday scene in PE markets

24-Sep-14

Chinese players will be away from the market for a week long National Day holiday starting from October 1 to 8, which will coincide with the Eid al-adha holiday to be celebrated across Muslim countries in the Middle East and Southeast Asia, as per ChemOrbis. Now players in the PP and PE markets are wondering what price levels will be seen after the holidays. A similar situation was also in place last year, when two holidays followed one another in the first weeks of October. In China, PP and PE prices followed an upward trend following the week-long holiday in early October despite the fact that crude oil prices were on a sharp downward trend at that time. Spot ethylene was also on a weak note for more than a month after the holiday in China but PE retained its firming stance until the end of the year. Today the sentiment prior to the week-long holiday is bearish in China’s PE market and some softening has already made itself felt on import prices. However, the recent PE losses have been rather limited even though crude oil has been steadily losing ground for more than three months. Plus, unlike last year, spot ethylene prices have been edging higher lately on tight supplies, which paved the way for the relative strength of the PE market. As can be seen from the graph below, the margin between spot ethylene and PE has been quite narrow recently. In the Middle-East and Europe, PE prices posted additional decreases right after the week-long Eid holiday that took place in the second week of October, 2013. This was in response to the plummeting crude oil and ethylene costs in Europe at that time. Following the lower settlement of the October ethylene contracts in Europe, PE prices continued to fall in Italy, which also put downward pressure on Turkey last year. However, PE prices reversed upwards in the second half of October, both in Italy and Turkey, with support from the upward trend of China, although the upstream markets retained their downward path for more than a month. This year, PE prices have been retreating since mid August in Turkey with pressure from the European market as well as lower upstream costs. The cost pressure is likely to remain in place in the near future although players assume that the large depreciation of the euro against the dollar will offset any possible losses in the upcoming monomer contract prices.