OREANDA-NEWS.  March 13, 2014. Players in China report that local PP and PE prices are beginning to show signs of stabilizing following several weeks of decreasing prices right after the Chinese New Year holidays, as per ChemOrbis.

Players attributed the shift in the market direction to lower operating rates on the part of domestic producers as well as the fact that producers have altered their pricing policy such that they are no longer giving retroactive discounts to their customers. In the PP market, domestic prices regained some lost ground to move back to levels last seen in the middle of the month. Along with the stabilization in prices, domestic prices on an EXW China basis also narrowed their discount against import prices to around US\\$60/ton from last week’s US\\$70/ton gap, which had been the largest premium for import prices in almost a year, according to data from ChemOrbis Price Index.

A converter based in Shantou reported receiving domestic prices with week over week increases of CNY150/ton (USD25/ton). “Domestic producers have limited their sales volumes and have lowered operating rates at a few of their plants. This gave us some confidence to replenish some stocks, although we continue to operate at below normal rates due to a manpower shortage,” the converter reported. A distributor based in Shanghai also reported receiving higher local prices over the past week.

“Domestic producers are trying to arrest the declining trend by better managing their inventories, but we feel that demand is not yet strong enough to support this initiative and that the recent gains in prices will prove to be temporary,” the distributor stated. A distributor based in Beijing expressed greater confidence with regard to the sustainability of the recent shift in pricing. “Lower-priced cargoes have been disappearing from the market since producers enacted their new measures and we think that prices have reached the bottom,” the distributor said. Data also shows a similar trend in China’s LLDPE market, with import prices regaining a premium of around USD 70/ton, their highest in almost a year, in the previous week before the premium retreated to around USD 65/ton this week as local prices regained some lost ground. A converter in the packaging sector reported receiving an offer for domestic LLDPE with a CNY100/ton (USD 16/ton) increase.

“Producers are standing firm on their prices and this has helped arrest the recent declines. We believe that prices are likely to stabilize in the coming week, although we do not think that demand is strong enough to support any additional upward movements,” the buyer stated. A distributor based in Shanghai added, “Local prices regained some lost ground as energy costs are firm and local producers are taking a stronger stance on their offers. We may considering replenishing our stocks as we believe that prices may still have some room to move higher.”