China PP flat yarn may extend falls after hitting six-month low

By Chow Bee Lin

SINGAPORE (ICIS)–China’s import prices for polypropylene (PP) flat yarn resins are hovering at a six-month low, and look set to fall further as domestic producers are saddled with high inventory of the polymer amid weak downstream demand, industry sources said on Friday.

A sharp decline, however, is unlikely as prices are backed by firm production costs, they said.

PP flat yarn import prices have shed 1.2% last month to average $1,477.50/tonne CFR (cost and freight) China in the week ended 28 February, according to ICIS.

Chinese PP producers had built up considerable inventory during the Chinese New Year holiday from end-January to early February, industry sources said.

During the holiday lull period, some of them had offered discounts of yuan (CNY) 50/tonne ($8/tonne) for the first 50 tonnes sold in an effort to reduce inventory.

This month, however, reduced output at some Chinese PP plants and planned maintenance at others should help ease the inventory pressure in China, industry sources said.(Please see table below)

Some Chinese traders, however, doubt the pressure will ease soon, citing that the process could take a full month.

Orders for plastics products are slowly improving, but downstream producers have adequate inventory of imported PP, a source at an east China-based manufacturer said.

A number of downstream plastics processors had stocked up on supply before the Chinese New Year holiday, Chinese traders said.

The Chinese markets were closed from 31 January to 6 February for the Lunar New Year.

For some PP grades such as specialty PP block copolymers and PP random copolymer grades, inventory pressure in China had less impact on their import prices as only a few domestic producers make these types of resins, a source at a South Korean PP producer said.

 ($1 = CNY6.12)

Additional reporting by Doreen Zhao

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