China’s PP and PE markets after holidays

All eyes are on the PP and PE markets of China, returning to work midweek, after a week-long holiday, as per the pricing service of ChemOrbis. Many players in global markets await the post-holiday response of China in order to gauge the market direction. As an initial response to the plunging crude oil and naphtha costs, the futures market on Dalian Commodity Exchange for PP and LLDPE fell sharply in the latter part of last week. January futures prices dived down by CNY688/ton (US$112/ton) for homo PP and CNY790/ton (US$129/ton) for LLDPE in the first three days after the holiday. The upstream markets continued to retreat early this week as crude oil on NYMEX dipped to US$85/bbl while Brent even broke well below US$90/bbl. Spot naphtha prices, meanwhile, retained their downward trend in line with the plummeting crude oil. In just a week, Asian naphtha slumped by more than US$70/ton on average. Chinese producers, who had been intending to come with higher prices in the post-holiday period, had to yield to small decreases this week for both PP and PE. “Local PP prices edged lower at the start of the week as the market is facing pressure from new coal based capacities as well as declining upstream costs. Trading activity is limited as most buyers want to get a clearer idea of the market trend before purchasing,” said a distributor based in Hangzhou. The import PP and PE markets held steady early in the week in China, meanwhile. However, players are not so sure if a steady trend can be sustained in the near term for import offers. Hesitancy about stock replenishment prevails across the Chinese market in the midst of the hefty losses of energy prices. Players both in Turkey and Southeast Asia also reported receiving lower PP and PE offers from South Korea this week. “We feel that South Korean sellers are facing some sales pressure nowadays,” said a Vietnamese trader. Turkish traders who received lower offers from South Korea interpreted this as a sign that China’s buying appetite remains thin after the holiday and their earlier firm stance started to falter. According to ChemOrbis, however, the futures market on Dalian pared some earlier losses in the first two days of this week. PP futures were up by CNY201/ton ($33/ton) while LLDPE regained CNY145/ton ($24/ton). Some Chinese players think that this may help prices stabilize in the near term as well. “Even though the sentiment may remain bearish, the bottom may be near,” argued a distributor.