With rebounded PP futures market, spot sentiment in China pick up visibly, but for how long?

As PP futures market witnesses two consecutive days of firming up, sentiment in the domestic spot market has improved visibly by mid of the week, especially in Northern China area. It is reported that customers are very active in asking for offers though refused to accept the CNY100/ton ($15/ton) day-on-day hike.

At the time this report is published, regular homo-PP yarn based on EXW China term stands at CNY8,400-8700/ton including VAT ($1079-1117/ton without VAT). 

“Some coal-based PP suppliers have withdrawn offers in anticipation of firmer prices in the coming days. We prefer to be cautious since June is still a slow month for the end product,” a woven bag manufacturer said.

In addition to the recovery in futures trading, lower inventories levels among local supplier also boost the movement. Total inventories at Sinopec and CNPC’s warehouses have fallen to 760,000 tons on 29 May 2019 – the lowest level since the beginning of February 2019. 

Several other buyers in the Northern market reported having purchased locally produced yarn cargoes after successful negotiation with suppliers to close deals at yesterday’s levels.

While the transactions have shown signs of improvement and firming futures market supports the sentiment, customers are not making replenishment at the pace that the market has seen at the beginning of last week. The fear of lingering trader war and slow demand from the animal feed industry is putting a blanket of caution across the sector.