New coal based capacities exerting pressure on China’s PP market

19-Sep-14

Players in China report that the PP market is facing some downward pressure these days owing to the start up of some new coal based capacities amid softer upstream markets and stagnant demand, as per ChemOrbis. Domesticl prices dipped week over week while import prices held largely stable, although prices on the upper end of the range were said to be less common in the market. In production news, three new plants with a combined capacity of 600,000 tpa started up in late August. A source at a Middle Eastern producer commented, “We have been gradually reducing our allocations of commodity grade PP to China in favor of specialty grades in anticipation of the arrival of new coal based materials. We are able to maintain a firm stance on our prices as we are currently only supplying a small number of regular customers and have reduced our allocation of commodity homo-PP grades from 3,000-4,000 tons per month to around 1,000 tons.” A trader reported receiving stable offers for Middle Eastern raffia, commenting, “We would consider purchasing if prices were at least US$30/ton lower. We are not optimistic about the demand outlook and are hesitant to take a position.” According to ChemOrbis, in the local market, prices have softened a bit over the past week, although prices remain within the largely steady trend that has been in place since mid-June. “Local PP prices are down around CNY100-200/ton (US$16-32/ton) on the week as new coal based capacities and weaker PP futures prices on the Dalian Commodity Exchange are weighing down the market. Most sellers are eager to divest their stocks and most players are not willing to build up inventory ahead of the week-long National Day holidays,” a distributor based in Shanghai stated. Another distributor concurred, commenting, “We think that sellers are facing inventory pressure ahead of the upcoming holidays and they will be eager to conclude deals before the end of this month. New coal based capacities are also having an impact, even though not all of the new plants are starting up on time and their share of the market remains fairly limited for now.” January PP futures on the Dalian Commodity Exchange are down CNY92/ton (US$15/ton) week over week.