China LLDPE prices may drop further in second-half May

GUANGZHOU (ICIS)--China’s linear low density polyethylene (LLDPE) spot prices may fall to below yuan (CNY) 10,000/tonne ($1,538/tonne) in the second half of May because of a softening in the futures market, weak downstream demand and the government’s tightening of credit lines, industry sources said on Thursday.

Spot prices of LLDPE were at CNY10,200-11,200/tonne on 17 May, a decrease of CNY400/tonne from the same period in April, according to data from Chemease, an ICIS service in China.

“The LLDPE spot market is expected to be bearish because most futures market players are speculating,” a trader in east China said at the 2011 Chinaplas exhibition.

“The decline in the futures market is also in tandem with the drop in spot market prices,” he added.

LLDPE futures were averaging at CNY10,755/tonne on the Dalian Commodity Exchange (DCE) on 18 May, a decrease of CNY965/tonne from the previous month, according to DCE.

The lack of demand in the downstream sector also contributed to the drop in prices, after the peak production season from November to February. The average operating rates in the agricultural film sector fell by 20% from the same time in April, an industry source said.

The 2011 Chinaplas exhibition is held on 17-20 May in Guangzhou.

($1 = CNY6.5)

Additional reporting by Dolly Wu