Polyolefins: A view from the ground

By Malini Hariharan

H2 is just two months away but one China-based market participant says that there is still a total lack of clarity on price direction for the rest of the year.

Buying activity picked up last week but he is not confident that this can be sustained. And he is certainly not expecting China to deliver a repeat of last year’s record rise in imports and demand.

The China market is redefining itself this quarter, he says.

Stocks, which had built up over Q1 and Q4 2009 are slowly coming down. Speculative activity is also easing as Chinese banks tighten credit availability.

He expects many new traders/speculators who entered the market in 2009 to exit. The froth that was seen last year would slowly evaporate, the market player added.

On the positive side, China has been reporting a steady rise in monthly export numbers.
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Pic source: Financial Times

They are not yet back to pre-crisis levels but this will contribute to polyolefin demand growth, he adds.

As for revaluation of the yuan, he thinks the Chinese government will follow its own timetable and will not want to hurt exports in the process. As the third quarter and fourth quarter are viewed as the peak manufacturing season when exporters make money, the government is unlikely to disturb exchange rates during this period, he adds.

Although the outlook is hazy, he expects prices to fluctuate in a narrower band this year with crude oil propping up numbers at the lower end of the range and increased availability from new plants preventing significant increase in prices.

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