China domestic PP price uptrend intact on restocking

SINGAPORE (ICIS)–Domestic spot polypropylene (PP) prices in China may remain on a general uptrend, despite Thursday’s decline, as restocking activities are expected to continue up to the end of the month.

PP flat yarn prices closed at Chinese yuan (CNY) 8,700-8,900/tonne ($1,314-1,344/tonne) EXWH (ex-warehouse) in east China on 19 October, slipping by CNY100-200/tonne from the previous day, according to ICIS data.

Weekly prices were assessed on 13 October at CNY8,500-8,800/tonne EXWH, the data showed.

Downstream converters have been tapping the spot market for cargoes as they were running out of PP feedstock, some of which were bought for as low as CNY8,450/tonne in late September, market sources said.

The increase in PP spot prices was also supported by a rising futures market, they said.

The January 2018 PP contract, the most actively traded contract on the Dalian Commodity Exchange (DCE), closed at CNY8,854/tonne on Thursday, up by 4.2% from end-September.

General expectations of government policies favourable to industries emerging from China’s ongoing 19th Communist Party Congress in Beijing was also buoying up market sentiment, industry sources said.

The major political gathering, which kicked off on 18 October at the Chinese capital, is held every five years and is expected to last about a week. 

Meanwhile, delays in the start-up of new domestic PP plants have also lent some support to prices. Shenhua Ningxia Coal Industry postponed the start-up of its 550,000 tonne/year coal-based PP unit to mid-November because of the political conference in October. The plant has had a successful trial run in mid-September, market sources said.

Yunnan Yuntianhua Group has also pushed back the start-up of its new 150,000 tonne/year PP plant later this year from October, they said.

In November and December, however, downstream demand for PP may dwindle, particularly in northern region of China. Use of coal for heating purposes typically spikes in the country during winter but the government has imposed tougher measures to tackle air pollution.

Operation of coal-fired boilers and construction projects in Shandong and Tianjin will be restricted this winter, industry sources said.

Focus article by Alex Feng

Pictured above: Colourful grain in sacks, Polypropylene (PP) flat yarn is used in sacks. (Source: imageBROKER/REX/Shutterstock)

($1 = CNY6.62)