Q2 saw an outburst of speculative frenzy all around the world, and in a wide variety of financial markets. China’s Dalian futures market saw LLDPE volume soar to 80 million tonnes – around 4 times total annual world demand. China’s easy money policy meant it was easy to borrow to speculate on a quick recovery.
But at some point, green shoots have to turn into real demand, if market rallies are to be sustained. And as the chart shows, Dalian’s volumes have since fallen away. June was down more than 50%, at 35 million tonnes. Pricing has also slipped, from 10, 285 yuan in April to 9,555 yuan last month – even though crude oil was rising from $50/bbl to $73/bbl.
Volumes are still very large by any normal standards, of course. As Becky Zhang points out in ICIS news, China’s total annual production is only 2.19 million tonnes. But in futures markets, the trend is your friend. Rising volume is always bullish. Today’s falling volume indicates that more questions are now being asked about likely levels of actual demand in H2.