China PP yarn prices plunge to new 2019 low amid poor demand

China PP yarn prices plunge to new 2019 low amid poor demand

Jun 17, 2020

SINGAPORE (ICIS)--China's domestic polypropylene (PP) spot prices have tumbled, with the PP flat yarn grade reaching a new low for this year amid poor demand which is expected to continue in the near term.

PP yarn accounts for more than a third of local supply.

Weekly prices of spot market were assessed at yuan (CNY) 7850-8200/tonne ex-warehouse (EXWH), down 9% from the end of third quarter, according to ICIS data.

Most domestic players remain cautious as demand dwindles ahead of the new year. Domestic suppliers meanwhile have slashed their inventory levels during the year-end lull.

The decline in the futures market also added pressure on the spot market.

January 2020 PP futures, the near-term traded contract at the Dalian Commodity Exchange (DCE), closed at CNY7,681/tonne on 18 December, down over 5.4% from early December.

In local spot market, coal-based PP yarn prices led the drop. The start-up of new capacities exerted heavy impact on homo-PP values. These new capacities include those by Jiutai Energy, Baofeng Energy, Hengli PC and Zhong’an United.

Competition among local producers such as Sinochem, Fujian Refining & Petrochemical and Zhongjing Petrochemical remain fierce.

New producer Dongguan Grand Resource has also started commercial operations from October for its new 600,000 tonnes/year PP plant, but was primarily producing injection grades.

Pre-sales are becoming a fairly common trend in the Chinese local market with several producers actively pre-selling cargoes to be delivered in late December to January next year in order to return funds and lock in orders. Pre-sold orders are generally lower  than current spot levels.

The addition of new plants also weighed on market sentiment.

Zhejiang PC have started test runs for its cracker and downstream units, which include 900,000 tonnes/year of PP designed capacity.

Speculation that there will be pre-sales for Q1 2020-delivered polyolefin products by traders and bearish downstream demand dragged spot prices lower.

In addition to the Christmas and New Year holidays, Chinese markets will be closed for seven days starting 24 January for the Lunar New Year holiday. The market is expected to gradually suspend trading in mid-January.

However, for copolymer PP, price falls have been slow, with the decline smaller than homo-PP amid tight supply.

Major PP copolymer producers Sinopec and PetroChina have kept their polyolefin inventories at a low level in the second half of 2019 and were still offering at firm levels. Some grades of PP copolymers are in limited quantities in major consumption areas domestically, according to a trader.

Furthermore, import prices for PP copolymer have trended lower than the domestic market which is gradually attracting imports, according to market

Thumbnail picture: Eye Ubiquitous/REX/Shutterstock

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