Pre-holiday activity disappoints in China’s polyolefin markets
In the PP and PE markets, a stable to softer trend took place during this week as demand lagged behind expectations for the pre-holiday period. Plus, players concurred that availability was sufficient owing to coal-based PP capacities brought online since last year. Last week’s stabilization lost some momentum for PE as well.
A Ningbo-based PP producer confirmed weak buying interest saying, “We have not received large orders for Christmas season and demand is below what we had hoped given lower spot propylene costs, the slower Chinese economy and volatile energy prices.”
A trader active in the PP and PE markets argued, “Supply is regular while buyers still prefer to source material on their need basis with small volumes. Done deals are rare. However, we believe that the market will rebound after the long holiday in China.” A Shanghai based seller commented that the local market was on a steady to softer path as players maintained their “wait and see” attitude.
“Another reason behind restricted consumption is the bearish trend of China’s stock market in addition to the slowing economy. Many facilities in the TV and shoe sectors were shut down. Meanwhile, some polyolefin producers restarted their production which means no supply shortage on the horizon,” a trader based in Xiamen commented. Prices may not show a rebound even in October, a traditionally strong month, according to him. January LLDPE and PP futures on the Dalian Commodity Exchange retreated by $35-45/ton week over week in China.
According to some players, domestic producers have plentiful stocks of PP and PE while PP is still under some pressure from the output from new coal based plants. “PP may continue on a weak path while PE is relatively better. Activity may pick up to some extent in the post-holiday period, particularly for those converters with low inventories. Demand, especially for HDPE and LLDPE, may revive after holidays,” they stated .
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