China’s PE, PP futures rise on coal, oil gains

Source : https://www.argusmedia.com/en/news/2254187-chinas-pe-pp-futures-rise-on-coal-oil-gains

 

Linear-low-density polyethylene (LLDPE) and polypropylene (PP) futures on China's Dalian Commodity Exchange rose sharply today, driven mainly by rallies in coal and crude oil prices.

LLDPE futures increased by 450 yuan/t or 5.3pc to close at Yn8,980/t ($1,139/t on an import parity basis), while PP futures also surged by 5.3pc or Yn453/t to Yn9,036/t ($1,146/t on an import parity basis).

Major Chinese producers raised their ex-works offers by Yn100-200/t, tracking the uptrend in futures.

There are several factors driving the price increase. China's coal prices have surged to record highs, forcing Chinese coal-to-olefin (CTO) producers to raise their offers as their margins were squeezed to breakeven levels. Crude prices have also risen, with Brent crude futures closing at a 1½-month high on 14 September.

Power cuts in the northwestern province of Shaanxi also supported price increases, as the measures will cut half of the region's PE production for the remainder of the year.

The Yulin Development and Reform Commission in Shaanxi has ordered three major local CTO producers to reduce their operations to 50pc from September to December, to meet their annual targets for total energy consumption and energy reductions. The three producers are Yanchang & China Coal Yulin, which has 300,000 t/yr of full-density PE, 300,000 t/yr of HDPE and 300,000 t/yr of LDPE/EVA capacity; China Coal Yulin with 300,000 t/yr of full-density PE capacity; and Shenhua Yulin with 300,000 t/yr of LDPE capacity.

Domestic LDPE supply has further tightened after the shutdown of Shenhua Yulin. Supply has already been squeezed by the closure of state-controlled Sinopec Qilu's 140,000 t/yr LDPE unit from 2 August for a 50-day turnaround, together with its cracker.

Import supply has remained tight since March and fell again recently following Hurricane Ida in the US, especially for LDPE, prices of which rose the most among all PE grades.

Increasing demand with the onset of Christmas orders and the delayed start-up of new capacity also supported the polymers market in China. Sinopec SK Wuhan is expected to delay the start of its new 300,000 t/yr HDPE unit to late September from July as earlier planned. Zhejiang Petrochemical has also postponed the start-up of its 350,000 t/yr HDPE and 450,000 t/yr full-density PE unit, likely to late September.

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