China LLDPE futures fall 1.6% on profit taking

22 February 2011 11:29  [Source: ICIS news]

SINGAPORE (ICIS)--Linear low density polyethylene (LLDPE) futures on the Dalian Commodity Exchange (DCE) fell 1.6% on Tuesday as investors took profits, local futures brokers said.

Liquidity focused on the May contract which closed at yuan (CNY) 11,975/tonne, 1.6% or CNY200/tonne ($30/tonne) lower from Monday’s settlement price of CNY12,175/tonne, according to DCE data.

Tuesday's trading activity was also due to investors who sought to lock in their profits by taking "sell" positions on the futures market, said Jack Hua, a petrochemical analyst at CITIC Newedge Futures in Shanghai.

These investors have physical LLDPE cargoes on hand but are unwilling to accept the prevailing physical market prices, and hence they choose to lock in their profits by taking a "sell" position on the futures market, he said.

LLDPE was trading at around CNY11,000/tonne EXWH (ex-warehouse) in the domestic physical market, according to local distributors.

An investor with physical cargoes on hand would have locked in a few hundred yuan of profit by taking a "sell" position on the futures market at Tuesday's closing price of CNY11,975/tonne.

The investors refused to accept the current physical market prices because they believe prices would increase in the weeks ahead as a result of high global crude prices, said Hua.

($1 = CNY6.58)

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By: Chow Bee Lin
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