China PE, PP may fall further on rising supply, weak demand

Focus article by Doreen Zhao

SINGAPORE (ICIS)–China’s polyethylene (PE) and polypropylene (PP) prices may continue falling as availability of spot supply will increase late this month with no expected recovery in demand, industry sources said on Thursday.

On 20 May, LLDPE film prices were assessed at yuan (CNY) 9,500-10,150/tonne ($1,532-1,637/tonne), down by CNY50-100/tonne from the previous day, and  CNY350-500/tonne lower from the previous week, according to ICIS data.

PP flat yarn prices, on the other hand, stood at CNY8,650-9,050/tonne, down by CNY250/tonne from the previous day, and by CNY350-450/tonne from the previous week, the data showed.

From April to early May, domestic prices of polymers in China had been rising because of plant shutdowns, which tightened supply. But sentiment turned sour towards mid-May amid heavy price falls in the LLDPE and PP futures markets and lacklustre demand, industry sources said.

Demand for PE used in agriculture film and for PP flat yarns used in woven bags is seasonally weak in May. PP consumption for packaging film has also yet to improve, they said.

Towards the end of the month, spot supply will increase once turnarounds are completed at domestic plants.

Dushanzi Petrochemical is scheduled to restart its PE plants with a combined capacity of 1.12m tonnes/year, and its 690,000 tonne/year PP plant in late May. The facilities in Xinjiang were taken off line in early April.

SINOPEC-SK (WUHAN) Petrochemical also plan to resume production at its 300,000 tonne/year LLDPE plant in late May. The unit in Hubei province was taken off line early this month for turnaround.

Pucheng Clean Energy’s 300,000 tonne/year PP plant will likewise be restarted in late May, after about two months of outage from 22 March, a company source said.

In mid-June, Jilin Petrochemical will resume production at its 275,000 tonne/year LLDPE unit and 300,000 tonne/year HDPE unit after a planned maintenance.

Increased supply will be met with an overall softening demand for polymers that will weigh on their market prices, industry sources said.

Demand for HDPE pipe grade used in plastic pipes as construction activities typically slow down during the rainy season in some regions of China, a downstream buyer said.

Demand for block co-polymer PP used in household appliances is also typically weak in June, an eastern-based trader said.

($1 = CNY6.20)

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