13 October 2009 06:03 [Source: ICIS news]
By Chow Bee Lin
SINGAPORE (ICIS news)--China, the world’s largest importer of polyethylene (PE) and polypropylene (PP) resins, has provided a fresh impetus for global markets as the polymer trade shows signs of recovery due to restocking activities since reopening late last week, market sources said on Tuesday.
Benchmark film-grade high density PE (HDPE) prices bounced back to $1,140-1,145/tonne CFR (cost and freight) China, with over 10,000 tonnes sold by two Asian producers for November shipment at $20-45/tonne higher from transactions cited on 9 October alone.
Other grades such as linear low density PE (LLDPE) also posted increases on 12 October at $1,165/tonne CFR China for November shipment, $20/tonne higher than the previous week but this could not be confirmed.
The inventory drawdown before China's National Day holidays and the rise in crude futures values above $70/bbl over the past two weeks were factors that had driven the post-holiday buying, Asian producers and traders said.
As much as 20,000 tonnes of film-grade HDPE was sold by an Asian producer alone on 9 October, surprising the market after the end of China's recent eight-day holiday period, market sources said.
PP imports were less exciting, with a South Korean producer selling injection and yarn-grade at $1,080/tonne CFR China on 12 October, unchanged from discussion levels around two weeks ago, Chinese traders said.
However, strong domestic PP prices due to a steep hike in domestic propylene feedstock values on 9 Octoberwere also bullish factors, an Asian PP producer said.
“Propylene prices rose yuan (CNY) 350/tonne ($51/tonne) to CNY8,350/tonne delivered last week, and domestic spot PP prices rose by about the amount,” said the producer.
Another Asian producer also attributed the sudden pick-up in trade to a general herd mentality, which he thought was typical of the market.
“Many importers starting asking for cargoes last week after they heard the large-volume transactions of film-grade HDPE and LLDPE,” said the second Asian producer.
Market sentiment was cautiously optimistic amid the gradual rise in trade volumes and the prices for some grades, with some Asian producers expressing concern that the current uptrend might fizzle out when more supplies from the recently started plants in China and the Middle East hit the market.
Some Chinese traders said current offers of European low density PE (LDPE) also raised the possibility of more deep-sea supplies flowing to China in the coming months, which could also cap any further regional uptrend.
New plants, such as Fujian Refining and Petrochemical Co (FREP) and Dushanzi Petrochemical in China, and PetroRabigh in Saudi Arabia, are expected to add to regional supply, possibly capping bullish sentiment.
FREP has a new 800,000 tonne/year PE unit and a 400,000 tonne/year PP unit, while Dushanzi Petrochemical's new facilities comprise a 550,000 tonne/year PP plant and a 900,000 tonne/year PE plant.
PetroRabigh operates a 900,000 tonne/year PE plant and a 700,000 tonne/year PP plant.
($1 = CNY6.82)
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