Sentiment swings in China’s domestic PP, PE markets

13-Aug-10

Domestic PP and PE prices have recorded significant increases over the past few weeks, in China driven by higher crude oil costs and expectations of better demand in line with the high season for agricultural film, as per Chemorbis. As crude oil dips and the high season is yet to materialize, sentiment is beginning to shift in China’s local market, as some producers and distributors move to lower prices to preserve their sales. According to data from ChemOrbis Price Index, domestic PE prices in China have posted considerable increases ranging from CNY500-900/ton (US$74-133/ton) over the past two weeks, while offers for domestic homo-PP cargoes have risen by CNY600-850/ton (US$89-126/ton) over the same period. Players attributed these price increases to higher upstream costs and better buying interest as converters and distributors who had been away from the market for some time came back to replenish their stocks. At the beginning of this week, most players were predicting a largely steady trend in the country’s PP and PE markets, saying that buyers would need to adjust to the new price level. However, with crude oil prices down US$3.46/barrel since Monday and the expected high season demand for agricultural film failing to materialize, distributors say that they have lost confidence in the market direction and are now expecting to see a correction over the coming week. A major domestic PE producer announced price reductions of CNY100-400/ton (US$15-59/ton) on their offers this week in hopes of maintaining normal sales, commenting that demand was not strong enough to support their previous price levels. Another major domestic PE producer in China is expected to follow this move with price decreases of their own over the next few days. In the PP market, most domestic producers elected to leave their offers unchanged this week, although distributors have initiated price reductions of around CNY100/ton (US$15/ton) in hopes of maintaining steady sales. Converters prefer to wait in the sidelines for now as they are expecting to see further price reductions in the distribution market as spot propylene prices have begun to lose some ground. Buyers opine that a correction is necessary given the significant price increases recorded over the past few weeks. However, players commented that they expect PP prices to decline more gradually than PE prices as availability of PP remains relatively limited inside China.