Poor demand and ample supply including new capacity coming on line these days would weigh on polyolefins prices in China in the first quarter of 2015, industry sources said.
Pucheng Clean Energy started trial runs at its 300,000 tonne/year LLDPE/HDPE swing plant and 380,000 tonne/year PP unit in late December 2014, a source close to the company said. The company expects to acheieve on-spec production later this month.
Shandong Shenda Chemical Industry started up its 200,000 tonne/year PP unit in early December.
Meanwhile, Baofeng Energy’s 300,000 tonne/year LLDPE/HDPE swing plant and 300,000 tonne/year PP unit has already come on stream in November 2014, according to company sources.
The polyolefins supply to China will also see additional deep-sea cargoes arriving as most overseas suppliers need to achieve their annual sales target.
This, combined with the clearance of inventories, will lead to the arrival of a large number of deep-sea cargoes from the end of 2014 to the first quarter in 2015, some local traders said.
Many domestic buyers thought that there was much space for overseas polyolefins producers to reduce their offers because of recent sharp decreases in Asian ethylene and propylene prices. Therefore, they retreated to the sidelines amid a pessimistic outlook.
Some overseas suppliers reduced offers for January shipment to compensate their customers who incurred significant losses in recent weeks when prices fell rapidly, market sources said.
Most local traders expect that supply may exceed demand because many workers of downstream factories would return home before the Chinese Lunar New Year holiday in February this year.
Some domestic distributors said most domestic suppliers planned to cut prices to promote sales before and after the holiday to relieve the selling pressure.
“Most construction [activity] is affected by the cold weather in winter, which causes weaker demand for pipe,” a person from a pipe factory said.
As a result, most producers will shut their units for maintenance from the end of the year to the Chinese Lunar New Year holiday. Even if some producers may keep their units running, the operating rates will be low.
“Although most producers are expected to resume operation at the end of February, the large-scale replenishment of stocks will not happen until the Lantern Festival which is on 5 March,” he said.
Lantern Festival marks the end of the Lunar New Year holidays.
A trader in north China said the production of mulching film would start from December 2014 to March 2015. However, it would give limited support to feedstock polyolefins prices because demand for greenhouse film would weaken at the same time.
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