Dalian’s LLDPE contract rises as demand slows

Chemical companies, Economic growth, Financial Events, Futures trading, Oil markets

Dalian Aug10.pngUndertaking fundamental analysis of a market can be a tedious business. You have to try and understand what uses the product might have, and the alternatives for the feedstocks. You might even have to look at inventory, and forecast future supply/demand levels.

Luckily, however, for the modern financial investor, these sad disciplines have been resigned to history. Instead, one merely has to look at the ‘correlations’ with designated key markets. And, of course, a helpful figure from one of the major investment banks is always on hand to provide guidance and support.

Nowhere are the benefits of modern trading more evident than in China’s Dalian future exchange, on the linear low density polyethylene (LLDPE) contract. Players there have no need to read boring stories in ICIS news about inventories being 30% – 50% above normal. Or to study purchasing manager reports that suggest demand is slowing.

No, they simply need to understand that the crude oil price is going up, along with the US S&P 500. Then, as shown in the above chart, they can pile in with their orders and take monthly volume (blue line) to an all-time record of 92 million tonnes – a mere 4 times annual global production. ‘Sentiment Rules OK’, as the graffiti used to say.

Trust the boring old blog to have to point out a potential flaw in the argument. As its friend, and Asian expert, John Richardson notes, “there is now a significant gap between (prices of) more expensive domestic material and cheaper imports“.

He also quotes a leading industry figure as warning that “It used to be that we had two markets in Asia – China and the rest of Asia, but now we have three – Dalian, China and the rest of Asia, which is causing a lot of confusion.” And this party-pooper adds that he is “really worried about the 100 KT of LLDPE that is in Dalian warehouses right now.”

This producer is clearly of the old school, who worries about such minor details as who is going to buy high-priced product when demand is slowing?‘. Luckily for the new style of investor, and the profits of the investment banks, nobody listens to such boring stuff on Dalian any more.

PREVIOUS POST

Ineos' Antwerp ethylene terminal a game-changer for Europe's C2 business

03/08/2010

In business, as in war, defence can often be the best form of attack. This seems...

Learn more
NEXT POST

White Paper downloads reach 7000

04/08/2010

The blog is delighted by the interest being shown in its White Paper ‘Budg...

Learn more
More posts
Budgeting for paradigm shifts and a debt crisis
27/10/2019

It is now 8 years since John Richardson and I published our 10-year forecast for 2021 in Boom, Gloom...

Read
Paradigm shifts create Winners and Losers
20/10/2019

MY ANNUAL BUDGET OUTLOOK WILL BE PUBLISHED NEXT WEEK Next week, I will publish my annual Budget Outl...

Read
Markets face major paradigm shifts as recession approaches
06/10/2019

Major paradigm shifts are occurring in the global economy, as I describe in a new analysis for ICIS ...

Read
$50bn hole appears in New York financial markets – Fed is “looking into it”
29/09/2019

Most people would quickly notice if $50 went missing from their purse or wallet. They would certainl...

Read
No Deal Brexit still a likely option if opposition parties fail to support a new referendum
15/09/2019

Canada’s normally pro-UK ‘Globe and Mail’ summed up the prevailing external view of Brexit las...

Read
Day of reckoning approaches for US polyethylene expansions, and the European industry
08/09/2019

Planning for future demand in petrochemicals and polymers used to be relatively easy during the Baby...

Read
China’s renminbi and the global ring of fire
01/09/2019

China’s property bubble puts it at the epicentre of the ring of fire © Reuters  China’s de...

Read
Oil market weakness suggests recession now more likely than Middle East war
11/08/2019

Oil markets remain poised between fear of recession and fear of a US attack on Iran. But gradually i...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more