By John Richardson
POLYOLEFIN markets are not going to bottom out until August-September at the earliest, according to several producers and traders who the blog spoke to yesterday.
And even if prices do eventually stop declining, confidence has all but disappeared that there will be any substantial recovery in either pricing or demand for the rest of this year.
We were also told that:
*A major Chinese trader is not taking positions anymore because it cannot predict where the market will go over the next week, never mind the next month. This is unprecedented. It is only buying from producers when it receives firm orders from customers.
*Middle East offer prices to China keep falling. For example, one Middle East producer has reportedly just offered linear-low density polyethylene (LLDPE) for end-May/early June delivery at $100/tonne lower than its previously contracted price.
*Even discounted Iranian material, mainly low density PE (LDPE), cannot find a final home in the China market. As a result, it is being re-exported from bonded warehouses to Indonesia, the Philippines, Australia and Vietnam - possibly even South America.
*We have received further confirmation that smaller traders in China have been buying and then immediately selling polyolefins at losses, in order to get the cash necessary to fund property deals. This is the result of restrictions on banks that prevent them from lending to the real-estate sector. For instance, PE and polypropylene (PP) was recently bought for Rmb9,800/tonne and immediately sold at Rmb9,600-9,700/tonne.