FocusChina PE, PP to extend gains post-holidays on restocking

SINGAPORE (ICIS)--China’s polyethylene (PE) and polypropylene (PP) prices may continue to increase after the week-long Lunar New Year holiday in early February, on restocking activity, industry sources said on Thursday.

“We see very limited downside potential because crude and monomer prices are so high now, particularly in Europe and the US,” a Shanghai-based distributor said in Mandarin.

Negotiations for February shipment of some Middle East and Asian PE and PP grades had begun this week, with deals cited at least $10-20/tonne (€7.4-14.8/tonne) higher than previous transactions, market sources said. Price spikes of the same magnitude were expected after the holidays, they said.

Strong feedstock costs will keep Asian polyolefins prices firm through next week even with the slowing down of trades ahead of the Lunar New Year festivities in China on 2-8 February.

Spot ethylene prices in Asia had risen to $1,230-1,250/tonne CFR (cost and freight) northeast Asia on Wednesday, $50-60/tonne higher from four weeks ago, while propylene prices were up $60-70/tonne over the same period at $1,330-1,350/tonne CFR China, on the back of firm crude values, according to ICIS data.

Crude was hovering near $91/bbl at midday on Thursday.

The prevailing retail prices of many PE and PP grades in China’s domestic market were much higher than the import costs, but the retail prices are expected to catch up with the import prices in the coming weeks because Chinese stockists would not sell at a loss, the Shanghai-based distributor said.

Imported LLDPE was, on average, selling at around yuan (CNY) 11,100/tonne ($1,687/tonne) ex-warehouse in east China, but the cost of booking fresh LLDPE cargoes for February shipment was above CNY11,500/tonne ex-warehouse, after taking duty and tax into account, local distributors said.

China’s PE and PP retail prices would eventually align with international feedstock costs because China was still a net importer of these plastic resins, said a key stockist in Zhejiang province, eastern China.

Meanwhile, tighter PP supply arising from heavy plant turnaround schedule in the Middle East and Asia from February to May would also support stronger prices after the Lunar New Year, Asian producers said.

Honam Petrochemical, Polymirae, Samsung Total Petrochemicals in South Korea; Saudi Polyolefins and PetroRabigh in Saudi Arabia; and Reliance in India have scheduled plant turnarounds that fall within the three months to May.

But producers may not be able to convince buyers to accept steep price hikes for February shipments even as the positive post-holiday outlook was stoking buying interest, industry sources said.

“We revised our February offers for linear low density PE (LLDPE) to $1,450/tonne CFR China because our initial offers at $1,470/tonne CFR China were rejected by our key customers,” said a Korean producer.

LLDPE was assessed at $1,380-1,430/tonne CFR China for the week ended 14 January, according to ICIS.