14 December 2009 05:21 [Source: ICIS news]
By John Richardson
SINGAPORE (ICIS news)--China’s polyolefin price volatility has greatly increased in 2009 as a result of closer links with changes in crude oil and equity prices, obscuring real levels of demand and making planning difficult, market sources said on Monday.
Linear-low density polyethylene (LLDPE) futures prices on the Dalian Commodity Exchange have closely tracked the shifts in the cost of crude oil since July 2008 – when the contract took off, said Paul Hodges of the UK-based chemicals consultancy, International e-Chem.
“Daily or even weekly fluctuations in crude don’t necessarily reflect a change in the fundamentals of any chemical or polymer market,” Hodges said.
“What matters, of course, is supply and demand in a particular market and effect of crude prices on feedstock costs when you buy your raw materials.”
But Hodges said he believed that a growing army of speculators were moving LLDPE prices on the exchange in line with the changes in crude as they tried to make money out of daily price volatility.
“Although volumes on the Dalian Exchange have gone down a lot recently (they peaked at 85m tonnes in April of this year), it is still a great guide to sentiment in the overall physical polyolefins markets in China,” said a Shanghai-based source with a major Asian polyolefin producer.
“The market is so hard to read at the moment that
When the Dubai World debt crisis erupted in late November leading to global dips in equity markets the LLDPE futures contract also fell, he added.
On the Thursday and Friday of that same week very few buyers in
LyondellBasell’s chief operating officer, Ed Dineen, also recently said that
Polyolefin pricing had become much more volatile in 2009, making sales and marketing strategies very hard to plan, said a Singapore-based source with a second Asian polyolefin player.
“The maximum visibility I can hope for these days is 2-3 weeks out, and so to describe this as a sales and marketing strategy would be a stretch,” he added.
“Estimating levels of real demand has become much harder these days because poylolefins pricing is moving in line with equities - which move often on pure sentiment."
The May LLDPE contract opened at CNY11,295/tonne ($1,654/tonne) on Monday, CNY35/tonne lower than Friday's closing price, and CNY20/tonne lower than Friday's settlement price.
($1 = CNY6.83)
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