Steep cuts in PP, PE offers by domestic producers in China

28-May-10

A number of Chinese producers have announced large reductions on their offers for PP and PE at the beginning of the week, as per Chemorbis. Buyers are delaying their purchases until a degree of stabilization is reached in upstream markets, leading to poor demand. To revive buying interest, sellers are attempting to attract greater interest from buyers by lower offers. Few of the sellers who have not changed their prices this week are prepared to consider some discounts for firm bids. In a bid to attract greater buying interest, several domestic PP producers, in the past two days, have announced decreases of CNY250-550/ton (US$37-81/ton) on their offers for homo-PP injection and raffia, and of CNY650/ton (US$95/ton) for PP block copolymer. Several producers commented that they were also supported in their decision to reduce their prices by the need to maintain price competitiveness with other producers inside the country. Advent of material from Sinopec Zhenhai’s new 300,000 tpa PP plant has also lent support to the downward movement in domestic prices. Despite price reductions observed over the past few days, distributors and converters are still unwilling to place orders for now as they are feeling uncertain about the future direction of the market and would prefer to wait and observe further developments. In the PE market, domestic producers began the week by announcing price cuts of CNY100-300/ton (US$15-44/ton) for HDPE film, CNY200-500/ton (US$29-73/ton) for LDPE film and CNY200-700/ton (US$29-102/ton) for LLDPE film, attributing their price cuts to their hopes of spurring greater sales during a downward trend. Producers also pointed to lower prices in the distribution market as well as ongoing losses in crude oil and naphtha prices as additional factors spurring them to reduce their offer levels. On the buyers’ side, both distributors and converters are showing reluctance to engage in trading activity for the present, with distributors complaining about their lack of a clear idea as to where the market might stabilize while converters are complaining of a slow-down in the number of end product orders they have received.