Chinese players: Bloated PP, PE supply weighted on market despite improved trades

As CommoPlast reported earlier about a storage issue facing domestic suppliers in China due to rising local supply and weaker than expected post-holiday demand; players in the country today see inventories remain indigested, hovering around record high levels despite some improvement in purchasing activities.

In fact, since last Friday, converters started to show up in the market to make replenishment up on new orders for end products, though most deals are in small quantity and with discounts. Offers at the lower end of the overall price range continue to attract better attention from buyers, who are still lacking of confidence in the near term outlook.

A converter informed, “We do received some new orders for end products recently, yet the quantity is well below expectation. It is still off-peak season for woven bags and we think business would only improve by second half of March. At the moment, we are consuming on hand cargoes and avoid large replenishment.”

Many pessimistic traders fear that the current bear might run into March considering the current stock levels in the country. A trader commented, “The number of deals concluded for both PP and PE today are better than last week. However, we are no less concern about March outlook as domestic supply continues to outpace demand, as there is no adjustment in local production in spite of limited cargoes available in import market.”

Unless there is a significant pick up in demand, it is very challenging for local prices to follow the firming trend in the international ground, players said, and that import offers to the country might face pressure from competitive domestic cargoes. “Yet, we think local suppliers might attempt to hold their cargoes, avoiding any drastic drop since futures trade started showing stabilizing trend. We hope with this, buyers would feel more confident to make fresh buy,” a trader added.

Domestic prices in China currently stand at CNY8500-8800/ton ‎($1056-1093/ton without VAT) for homo-PP, CNY9550-9950/ton ‎($1186-1236/ton without VAT) for LLDPE film, CNY10000-10500/ton‎ ($1242-1304/ton without VAT) for HDPE film and at CNY10300-10900/ton ‎($1280-1354/ton without VAT) for LDPE film, all based on EXW China, cash term.