China PE futures trade higher on plastics demand speculation

16 August 2010 11:45  [Source: ICIS news]

SINGAPORE (ICIS)--Linear low density polyethylene (LLDPE) futures on China's Dalian Commodity Exchange (DCE) traded 2.2% higher on Monday due to speculation of strong plastics demand driven by investment growth in the country's property market, sources said on Monday.

"Some investment funds started snapping up LLDPE futures in anticipation of improvement in the Chinese property market and hence plastics demand,” said Canfeng Zheng, an analyst with Shanghai Chaos Investment.

Investments in the Chinese property sector totalled yuan (CNY) 2,386.5bn ($351m) in the first seven months of this year, 37.2%  higher from the same period last year, according to China’s National Bureau of Statistics.

The most actively traded January contract closed at yuan (CNY) 10,540/tonne on Monday, up by CNY230/tonne from the previous close, after breaking a seven-day losing streak on 13 August, according to DCE data.

The January contract’s closing price fell by CNY240/tonne, or 2.3%, from CNY10,495/tonne on 4 August to CNY10,255/tonne on 12 August, the DCE data showed.

Easing concern about domestic interest rate hikes might have also contributed to Monday’s price upswing, according to Liang Kong, a chemical and energy analyst with broker Yongan Futures.

There had been speculation that LLDPE futures would fall throughout the second half of August due to lower cash flow caused by a tightening in China's domestic fiscal policy.

($1 = CNY6.80)

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By: Chow Bee Lin
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