China resins futures dive on trade tensions, credit concerns

14 September 2009 12:57  [Source: ICIS news]

SINGAPORE (ICIS news)--China’s linear low density polyethylene (LLDPE) and polyvinyl chloride (PVC) futures fell as much as 5% on Monday due to trade tensions between China and US as well as concerns over credit tightening further, according to local futures brokers.

The announcement on 11 September by the US to levy additional tariffs on Chinese tyre imports triggered sharp falls in the natural rubber futures traded on the Shanghai Futures Exchange (SHFE), which in turn drove panic selling on the Dalian Commodity Exchange (DCE), the futures brokers said.

Concerns over trade tensions were heightened after China’s Ministry of Commerce (MoC) announced on 13 September to start an anti-dumping investigation into imports of automobile and poultry products from the US, one of the futures brokers said.

China’s move on automobile and poultry imports from the US was seen as a retaliation, a sign that the China-US trade tension could escalate,” the futures broker said.

In addition, discussions in the market that some local banks were being audited for how they had utilised funds from China’s yuan (CNY) 4,000bn ($585.6bn) fiscal stimulus package raised concerns that credit could be tightened, the futures brokers said.

China’s two-year stimulus package, which was introduced in November 2008, was meant to ensure that the country’s economy grows at a decent pace despite the global recession.

According to local media reports, China’s National Audit Office has started to audit some local banks to determine if funds from the stimulus package had been mismanaged.

Trading of November LLDPE futures on the DCE was halted in the afternoon session after falling by 5% to CNY9,975/tonne, according to data from the DCE.

According to the DCE’s trading rules, a transaction price established after a 5% fall from the preceding day’s settlement price becomes the floor price, and subsequent offers below this level are not accepted on the same trading day.

The November PVC contract closed 3.4% lower on Monday at CNY6,715/tonne, down CNY235/tonne from Friday’s settlement, according to DCE data.

($1 = CNY6.83)

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By: Chow Bee Lin
+65 6780 4359



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