FocusWeak crude, normal op rates may cap China PE, PP uptrend

17 February 2009 09:31  [Source: ICIS news]

SINGAPORE (ICIS news)--The recent uptrend in China’s polyethylene (PE) and polypropylene (PP) markets may be capped by the end of February due to weak crude values and regional producers raising operating rates back to full capacity, industry sources said on Tuesday.

Market sentiment has been bearish since the middle of last week when crude values fell to around $35/bbl (€27/bbl), which was reflected in a significant slowdown in traders’ restocking activities, Asian traders said.

"Many regional traders have been replenishing inventories since early February but the buying interest dwindled markedly after crude (values) fell last week," a Chinese trader said.

Most resin producers in China, South Korea and Taiwan have been ramping up production since early February after operating at reduced rates of 60-80% from October to January due to weak demand, regional resin producers said.

"Most Chinese plants are running above 80% capacity and are expected to achieve 100% in the coming weeks," a source at Chinese major Sinopec said.

For the week ended 13 February, the benchmark film grade high density PE (HDPE) and PP yarn grades were assessed respectively at $940-960/tonne and $900-920/tonne CFR (cost and freight) China.

This was about 17% and 21% higher from mid-December, which was driven mainly by restocking among traders and tight supply due to regional production cuts, according to global chemical market intelligence service ICIS pricing.

Negotiations this week for March loading have been capped below $1,000/tonne CFR China for HDPE film grade and around $910-930/tonne CFR China for PP yarn grade, Asian traders and producers said.

"Some Asian producers are offering film grade HDPE at $1,000/tonne CFR China for April shipment, but such an offer is likely to face resistance from traders and end-users," a second Chinese trader said.

Traders who had earlier bought HDPE film grade for February arrival are already facing difficulty in selling these cargoes at $960-970/tonne CFR, the second Chinese trader said.

Echoing the bearish sentiment, a Taiwanese producer said its offers for linear low density PE (LLDPE) were below $1,000/tonne CFR China for March loading, although traders' sales were above that level last week.

LLDPE was being negotiated around $1,000/tonne CFR China for February delivery, as much as $30/tonne lower from 13 February, a third Chinese trader said.

The China domestic spot market also showed signs of weakening on Monday, with imported film grade HDPE, LDPE and LLDPE prices at yuan (CNY) 8,550-9,200/tonne ($1,252-1,347/tonne) EXWH (ex-warehouse).

This was down CNY50-300/tonne from 13 February, according to China chemical market intelligence service ICIS chemease.

(1$ = €0.78/$1 = CNY6.83)

For more on PE and PP visit ICIS chemical intelligence
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By: Chow Bee Lin
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