FocusChina PE, PP to extend falls; may rebound in Aug on restocking

06 June 2012 05:53  [Source: ICIS news]

By Chow Bee Lin

China port in Wuhan, Hubei provinceSINGAPORE (ICIS)--China’s polyethylene (PE) and polypropylene (PP) import prices may continue to fall, in line with declines in values of crude and feedstock olefins, industry sources said on Wednesday.

Price weakness in the Chinese polymers markets may prevail until August or September, when restocking activities begin, they said.

Sharp falls in naphtha and crude prices since 1 June have dampened sentiment in the PE and PP markets, with a number of importers expecting prices to fall in July, or at best hover around the June levels.

China’s average PP import prices could breach the $1,300/tonne (€1,040/tonne) CFR (cost and freight) China level if US crude futures fall below $80/bbl, a Taiwanese resin producer said.

At noon, US crude futures were trading at $84.77/bbl, while Brent crude was at $99.27/bbl.

There are concerns that China’s average PE import prices could fall to below $1,200/tonne CFR China if the country’s import demand fails to improve, a South Korean resin producer said.

Importers might decide to come back to the market in August and September to procure cargoes, since most plastics traders and processors in China are holding low inventories and would need to replenish stocks, according to two plastics packaging processors.

Most importers have refrained from building up inventories given uncertainty in global demand amid the ongoing sovereign debt crisis in the eurozone, they said.

“The eurozone crisis is like a time bomb,” one of the processors said.

Europe is a major export market for Chinese end-products.

Some plastics distributors said they expect downstream demand to improve in August and September, as plastics processors are expected to ramp up production ahead of the year-end consumption in the local and export markets.

Downstream demand would get a further boost if monetary easing policies are introduced in China and the US, a Chinese trader said.

Other industry sources were less optimistic about the impact of monetary easing policies.

“The problem is that demand is very weak because people are not spending,” the Taiwanese resin producer said.

($1 = 0.80)

Additional reporting by Amy Yu, Angie Li

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Chow Bee Lin
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