Market outlook bullish as China returns to the markets

25-Feb-10

Polyolefin traders in China have started making enquiries after the Lunar New Year holidays. Though end-users are not yet buying, there has been a recovery in exports and order booking is looking up, as per ICIS. Concerns that pre-holiday inventory levels may be too high appear to have been stifled as they do not appear very alarmingly. They look high considering the reduced number of working days (in February) but on a volume to volume basis they are at a normal level. A polyolefin trader described the market as stable to tight. International producers are in a wait and watch mode, but domestic prices are believed to be getting better in China. The Dalian LLDPE futures market moved up 3%, mainly on higher crude oil values and a firm physical market. The rise in values contradicted earlier expectations that China PE prices would collapse after the holidays. ICIS news also reports that offers for PVC edged up by US$20/ton after the holidays. While buyers had expected a fall in offer levels given the recent decline in feedstock costs, producers said that strong seasonal demand would exert upward pressure on prices. As per a report, post-holiday, price of PE, PP, MEG and PTA moved up as the Chinese market reacted to the rise in crude prices during the holidays. And demand was firm on concerns of a supply shortfall due to maintenance shutdowns at South Korea and Japan over February-April. Petrochemical prices are forecast to remain solid through April. Turnarounds will constrain availability but a lot will also depend on the volumes from the Middle East, especially from plants that had faced operating issues in December-January. China's recent credit tightening moves are also expected to impact speculative activity and demand for petrochemicals.