China market: Trading activities slow down, post holiday outlook mixed

As the mid-Autumn Festival draws near, Chinese players are embracing the holiday mood from which trading activities in the country is reported to be slower. Most buyers only replenish hand to mouth basis claiming continuous falling PP futures prices might post serious risk to spot ground. And in fact, domestic spot offers for PP has fallen for five consecutive sessions today, accumulating a total drop of CNY300-350/ton ($45-52/ton). However, post-holidays expectation is rather mixed.

A converter active in homo-PP yarn area informed, “We have purchased two containers of homo-PP at a slight discount, which is sufficient to cover our production needs for a week. We might wait till next week before making another replenishment. We think if demand condition does not improve after the holidays, there are chances that suppliers might need to reduce prices further to attract buying interest.” This is especially when two new coal based PP plants with total capacity up to 1.15 million tons/year are starting up end of this month. 

On the other hand, traders are having a more optimistic expectation for post holiday outlook with a market source said, “Our customers are not keeping high inventories, means that they might need to restock after the mid-Autumn festival before departing for the National Day holidays. This might keep the market trend stable in the coming week. We couldn’t conclude any deal today.” 

Compared to PP market, LDPE film sector is firm with the support of limited supply, stemming from couple of major shutdowns in the country. However, further price increment might face stiff resistance as domestic offers have reached CNY10150-10500/ton ($‎1300-1345/ton without VAT). A trader informed, “Our small to medium size customers have yet to ramp up operation rate and we hope they would after the festival. LLDPE film sales are dropping due to weak futures market and also improving supply condition. We expect a more of stable trend in the coming days.”