Optimism as China returns

By Malini Hariharan

The China market appears to have started the year of the tiger on a strong note. We are not yet hearing a roar but at least it is not a whimper.

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Pic source: Xinhua

A polyolefin market participant says that traders have started making enquiries after the Lunar New Year holidays. End-users are not yet coming up to buy but there has been a recovery in exports. “The order book scenario is getting better,” he says.

There were some concerns before the holidays that inventory levels may be too high but he believes that they are not alarmingly so especially with the first line traders. “They look high considering the reduced number of working days [in February] but on a volume to volume basis they are at a normal level,” he says.

Another polyolefin trader described the market as stable to tight. “International producers are waiting and watching. But the feeling is that local prices are getting better.”

And there was positive news from the Dalian lldPE futures market which delivered a surprise yesterday moving by up 3%. The rise was attributed to higher crude oil values and a firm physical market. The rise in values contradicted earlier expectations that China PE prices would collapse after the holidays, market participants told ICIS news.

ICIS news also reports that offers for PVC edged up by $20/tonne after the holidays. While buyers had expected a fall in offer levels given the recent decline in feedstock costs producers said that strong seasonal demand would exert upward pressure on prices.

In a report released today Woori Investment & Securities says that prices of PE, PP, MEG and PTA moved up yesterday as the Chinese market reacted to the rise in crude prices during the holidays. And demand was firm on concerns of a supply shortfall due to maintenance shutdowns South Korean and Japanese plants over February-April. It has forecast petrochemical prices to remain solid through April.

It might still be too early to draw a clear picture of the next few months. Turnarounds will certainly constrain availability but a lot will also depend on the volumes that come out from the Middle East, especially from the plants that had faced operating issues in December-January. And not to forget there is also the influence that China’s recent credit tightening moves will have on speculative activity and demand for petrochemicals.

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