China’s physical LLDPE hikes on demand; bucks futures downtrend

02 November 2010 11:35  [Source: ICIS news]

SINGAPORE (ICIS)--China’s physical linear low density polyethylene (LLDPE) trade rose by yuan (CNY) 200-300/tonne ($29.90-44.84/tonne) on Tuesday, bucking the local LLDPE futures downtrend, local traders said.

The most actively-traded January LLDPE contract closed at CNY11,665/tonne on Tuesday, CNY110/tonne or 0.9% lower from Monday’s settlement.

But in the physical market, imported LLDPE was trading at CNY11,300-11,400/tonne in northern China and at CNY11,200-11,300/tonne in eastern China, on an EXWH (ex-warehouse) basis, local distributors said. These were CNY200-300/tonne higher than last Friday, they said.

Traders’ sales of different sources of imported LLDPE were at a minimum level of $1,350/tonne CFR (cost and freight) China for November shipment, they added.

Imported LLDPE was sold at $1,330-1,370/tonne CFR China during the week ending on 29 October, according to ICIS.

The divergence of the physical and futures price trends was unusual as these two markets usually moved in tandem, the local traders said.

Strong demand from the local agricultural film application sector and widespread anticipation that the yuan would strengthen against the US dollar over the coming months were the main price drivers in the physical polyethylene (PE) market, local distributors said.

LLDPE futures weakened mainly because investors were concerned that the US Federal Reserve might announce a smaller-than-expected economic stimulus package in its two-day open market committee meeting due to begin on Tuesday, local futures brokers said.

“If a smaller-than-expected stimulus package was announced, the US dollar was expected to strengthen and in turn causes crude futures prices to weaken," said Wanda Futures’ research director, Wang Chen.

Weaker crude futures typically cause LLDPE futures prices to fall, Wang added.

($1 = CNY6.69)

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By: Chow Bee Lin
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