Price and market trends: Restocking to buoy up China PE, PP in Q3

31 May 2013 09:40  [Source: ICB]

Buyers abandon "hand-to-mouth" purchasing and return to the market in anticipation of rising prices

China's polyethylene (PE) and polypropylene (PP) import prices may increase in the third quarter as buyers are expected to replenish their stocks on the back of improved market sentiment, industry sources said on 20 May.

On 17 May, the benchmark LLDPE resins prices averaged $1,380/tonne (€1,076/tonne) CFR (cost and freight) China, unchanged from four weeks ago, according to ICIS. For the benchmark PP flat yarn resins, average prices stood at $1,398/tonne CFR China, 0.4% higher, ICIS data showed.

Most importers tried to prevent a strong build-up of inventory - preferring to buy on a "hand-to-mouth" basis - as they were expecting downward pressure on prices when fresh supply becomes available in the region soon.

In Singapore, ExxonMobil is expected to ramp up production at its two new linear low density PE (LLDPE) plants with a combined capacity of 1.3m tonnes/year in May/June, but this could not be confirmed with the producer.

In China, the joint venture Sinopec/SK Energy PE and PP plants are expected to start up in end-May, while Sichuan Petrochemical is due to start production in July.

PE and PP are also likely to follow crude oil prices, which are showing some stability. Typically stronger downstream demand in July/August could nudge up polyolefin prices, a source said.

China, a key PE and PP market, is expected to attract more inflows of foreign capital amid expectations that the world's second biggest economy will perform better in the second half of the year. More capital flows should help pump up liquidity in the commodity markets, a Chinese trader said.

But any PE, PP price rises in the third quarter are likely to be moderate as downstream demand in China is still weak, sources said.

Additional reporting by Amy Yu, Angie Li, Doreen Zhao, Lizzie Yu, Summer Zhang

By: Chow Bee Lin
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