FocusChina LLDPE futures outlook bullish on crude

21 February 2011 10:53  [Source: ICIS news]

SINGAPORE (ICIS)--Transaction prices on China’s linear low density polyethylene (LLDPE) futures are expected to rise this week on the back of strong global crude futures, local market analysts said on Monday.

"We expect WTI crude to surge beyond $95/bbl in the near term as a result of the unrest in the Middle East,” Wang Zairong, a petrochemical analyst at Cofco Futures in Beijing, said in Mandarin.

"Brent crude futures are trading above $100/bbl so we expect WTI crude futures to rise further,” said Ye Hong Bin, a petrochemical analyst at China International Futures at Shenzhen in southern China.

Liquidity focused on the May LLDPE contract, which closed at yuan (CNY) 12,235/tonne ($1,862/tonne) on Monday, down 0.3% or CNY40/tonne from last Friday’s settlement price of CNY12,275/tonne, according to data from the Dalian Commodity Exchange (DCE).

The Chinese government’s move to tighten its monetary policy further last Friday (18 February) pushed LLDPE futures slightly lower on Monday, but the decline was stemmed by bullish sentiment triggered by the strong crude market, Wang Chen, research director of Wangda Futures in Beijing, said in Mandarin.

He was referring to the People’s Bank of China’s move to lift bank reserve requirements by 50 basis points to a record 19.5%.

The May LLDPE contract was expected to fluctuate within a range of up to CNY800/tonne this week, with Friday’s closing price forecast to be higher on a week-on-week basis, analysts said.

"We expect the May contract to close slightly higher than last Friday’s,” said Jason Huang of Shanghai CIFCO Futures in Shanghai.

"We expect the May contract to close at around CNY12,300/tonne or higher on Friday,” said Wang at Cofco Futures.

Li Chen Ming, a petrochemical analyst at Guangfa Futures in Guangzhou, forecast that the highest trading price for the May contract will exceed CNY12,500/tonne this week, while Cofco Futures’ Wang expects the May contract to trade at up to CNY12,800/tonne this week.

The physical polyethylene (PE) market is well supported by a tight regional supply, and that in turn will lend strength to the futures market, said Li at Guangfa Futures.

"There’s a lack of new PE capacity in China this year but local PE demand will continue to grow. We expect PE demand to grow by 5-10% this year,” he said in Mandarin.

($1 = CNY6.57)

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By: Chow Bee Lin
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