Chinese traders: Firmer futures prices push spot PP sentiment

Futures prices on Dalian Commodity Exchange opens the new week with drastic increases as PP contract for September delivery settled CNY265/ton ($40/ton) higher than last week while LLDPE contract leaped CNY250/ton ($38/ton). This has buoyed the spot market sentiment in which both local and import offers firmed up right on the first trading day of the week.

Indeed, import homo-PP from dutiable origins are reported to gain $10-20/ton from last week to reach $940-950/ton CFR China, LC 0-90 days. A trader received Omani homo-PP at $940/ton CFR China said, “We think this is just the start of the up trend thanks to supply tightness and strong support from futures trades. However, we see most domestic buyers are showing very small interest in import cargoes given weaker CNY and competitive local material. Looking forward, the medium term outlook remains cloudy to us.”

Meanwhile, domestic offers for homo-PP also added CNY50-100/ton ($8-16/ton) as sellers claimed to have minimal inventories pressure. There are reports from market sources saying couples of major local producers have withdrawn their price lists with expectation of achieving better margins in the coming days after seeing futures market skyrocketed. A source showed his concern, “It looks like buyers have already restocked sufficiently and at the moment mostly are on the sideline monitoring market movement. This justification is based on a high number of inquiries we receive today but disappoint sales result.”

Players are currently waiting for data on domestic inventories, yet many have expressed optimistic expectation for the near term outlook. Buyers might return to the market for another round of replenishment in July, strengthening market anticipation of a more stable to firm trend in the coming month.

Import homo-PP to China is currently reported at $940-990/ton CFR China, LC 0-90 days term.