China PE, PP likely to see fall in prices over excess supply and low demand

The Chinese domestic market for polyethylene (PE) and polypropylene (PP) likely to continue seeing decline in prices into October, as scheduled plant start-ups of Ningxia Baofeng Energy’s plant will boost supply, with not much upturn in demand, according to industry sources on Wednesday.

China’s PE-PP capacity is due to increase by a total of 600,000 tonnes/year in October, with start-ups of Ningxia Baofeng Energy’s plants in the Ningxia Hui autonomous region. The new PE and PP plants have the same 300,000 tonne/year capacity.

Moreover, in the third quarter alone, China added 900,000 tonnes/year in new PE capacity, and 1.8m tonnes/year of PP capacity, bringing the total PE and PP capacities so far to 14.5m tonnes tonnes/year and 15.5m tonnes/year, respectively.

Some domestic new PE and PP plants which were put into operation in the third quarter of 2014 would also weigh on the market , including Shaanxi Yanchang Chinacoal Yulin Energy & Chemical, China Coal Shaanxi Yulin Energy & Chemical, Maoming Petrochemical and Shijiazhuang Refining & Chemical Co, an eastern-based trader said.

On 23 September PP flat yarn prices stood at CNY10,850-11,100/tonne, down by CNY300/tonne and linear low density PE (LLDPE) film prices for locally produced cargoes were assessed at yuan (CNY) 10,200-10,750/tonne ($1,661-1,751/tonne), down by CNY900-1,000/tonne from a month ago as per the data.

Tight credit conditions in China also continue to weigh down on the domestic market , industry sources said.