16 April 2010 05:46 [Source: ICIS news]
By Chow Bee Lin
SINGAPORE (ICIS news)--Polyethylene (PE) and polypropylene (PP) prices are set to rise during Chinaplas, Asia’s largest annual plastics event in Shanghai, showing the first bullish signs for the year led by strong economic growth in the country, industry sources said on Friday.
"Discussions for May shipments will begin in earnest next week at the Chinaplas exhibition and deals are expected to be closed at higher prices because suppliers are unlikely to drop their prices in today’s market," a Chinese PE trader in east ?xml:namespace>
Global suppliers of plastics raw material and machinery converge at Chinaplas every year to showcase their latest products, and this year’s show is expected to draw 75,000 visitors from 130 countries. The event this year will run on 19-22 April in Shanghai.
China’s strong first-quarter economic performance, rising plastics futures prices in the past weeks and high crude prices were boosting sentiment in the second half of April, market players said.
Linear low density PE (LLDPE) futures traded on the Dalian Commodity Exchange (DCE) settled at yuan (CNY) 11,905/tonne ($1,743/tonne) on Thursday, CNY225/tonne or 1.9% higher week on week.
Chinese PP importers had not been buying much since the year started as they were holding high inventories, and they believed suppliers would eventually cut prices, said another China-based trader.
But as negotiations for May shipments neared, many importers were beginning to realise that a drastic price fall was not going to happen soon, he said.
"Chinese PP traders were now concerned that the replenish cost for May shipments would be higher due to a general resistance among suppliers to give further discounts," the second trader said.
But any proposals for higher PE prices would be “unreasonable” as based on current naphtha feedstock prices, most PE producers were making good margins, and there were ample stocks in China, said a third trader based in east China.
The benchmark film grade high density PE (HDPE) was assessed at $1,180-1,260/tonne (€873-932/tonne) CFR China for the week ending 9 April, according to global chemical market intelligence service ICIS pricing.
Any uptrend in PP prices in the second half of April would likely lose steam when negotiations for June shipments begin in end May, as an influx of new supply from the Middle East and
At least 4.7m tonnes/year of PE and 4m tonnes/year of PP capacities were expected to start up in 2010 in Asia and the
China currently holds more than 1.8m tonnes of PE and over 1.2m tonnes of PP in stock, including inventories held by local producers Sinopec and PetroChina, and distributors’ inventories of locally produced and imported material, market players said.
Its average monthly demand for PE was estimated at 1.3m tonnes and at 1.1m for PP this year.
With additional reporting by Judith Wang
($1 = CNY6.83 / $1 = €0.74)
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