FocusChina’s PE, PP price uptrend may fizzle out on weak demand

10 July 2012 06:28  [Source: ICIS news]

By Chow Bee Lin

The uptrend in China’s polyethylene (PE) and polypropylene (PP) import prices is likely to continue to end-July or early August SINGAPORE (ICIS)--The current uptrend in China’s polyethylene (PE) and polypropylene (PP) import prices is likely to continue to end-July or early August on strong crude prices and low buyer inventory, before fizzling out on weak downstream demand, industry sources said on Tuesday.

Most traders and end-users in China are holding low inventories and their restocking activity will support prices going forward, said a source at a Japanese trading house.

China’s PP import prices may find support at $1,400-1,450/tonne (€1,134-1,175/tonne) CFR (cost & freight) China, the source said.

Bullish sentiment triggered by strong crude futures prices will also support the prices of PE and PP in China, he added.

“Crude prices are unlikely to go below $80/bbl in the near term,” he said.

However, the PE and PP price uptrend may not be sustainable because downstream demand has not shown signs of improving and as the global economic outlook is uncertain, traders in China said.

China’s PE and PP prices are likely to rise further because local producers will raise their offers amid relatively tight supply, but buyer confidence remains weak because of weak downstream demand, hence any price hikes will be limited, said a source at a Malaysian resin company.

Uncertainty in the global economic outlook also dampens market sentiment, said resin traders and suppliers in China.

“The recent price uptrend could be short-lived because the global economic outlook remains bleak,” a source at a Saudi resin company said.

The benchmark PP yarn and film grade high density PE (HDPE) weekly average prices rose to $1,315/tonne and $1,355/tonne CFR China respectively in the week ended 6 July, up by 2.7-3.0% from the previous week, according to ICIS.

Several PE and PP producers in northeast Asia withdrew their August offers this week, in anticipation that regional prices will rise further in the coming weeks.

($1 = €0.81)

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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