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Insight | Time: Sep 26 2019 3:57PM
PE market fluctuates lower after the mixed offers
 
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Last week, crude oil as well as other spot and futures market was mixed on account of the Saudi Arabia oil field events. First of all, as the influence of Saudi Arabia oil field events remained boiling, each products went up significantly. Then Saudi Arabia declared that the oil filed had resumed its production, crude oil price fell down sharply and other products declined, too. PE CFR China market was also mixed in mid-Sep. Most suppliers were reluctant to sell goods at previous lows, some offered too high with a very strong market speculation atmosphere while downstream ignored. Market did not ease until Sep 20, offers had increased and were basically conformed to the mainstream market.



Then what is going to happen to the PE CFR China market? The market still needs time to download the inventory which would be accumulated in the holiday, and market price may fall down slightly. It is expected that the domestic market will remain bearish for a relatively long time.

First of all, PE CFR China and RMB market spreads are waving around the zero.



As RMB market was healthy and in consolidation now after the Saudi Arabia oil field events, PE CFR China market turned mild. And the exchange rate fluctuated slightly around 7.1, PE CFR China market and RMB market spreads were waving between surpluses and minus. From this point of view that the PE CFR market would be narrowly fluctuating.

Secondly, the large quantity of cargoes traders restocked in previous stage need consumption.

PE CFR market dropped sharply before the mixed atmosphere. The market price dropped and the whole market was in strong wait-and-see stance for a long time. Many first-hand traders procured large volume goods at low-rates and most of them would be sold to the RMB market, and only a small portion would be traded in USD form with buyers processing imported raw materials and exporting finished cargoes. So the pressure on PE USD market would be moderate.

Furthermore, the market was basically saturated after the severe fluctuation and downstream demand was not prosperous as demand in peak season was lukewarm over the years.

Although there were little offers and bids in the market, some traders restocked goods even under the circumstance of unstable production in Saudi Arabia. With the National Festival drawing near, most plants had advanced their pre-holiday stock preparation. Although market offers were few, there were still some private negotiations. Under such circumstances, downstream demand basically reached saturation or half-satiation and downstream would purchase cargoes according to the actual order.

Moreover, the view of golden September and silver October has not conformed to the actual situation in recent years, and market insiders are mostly impressed that demand in the peak season has been lukewarm. Moreover, since the Sino-US trade war has not ended yet, the exchange-rate devaluation against the US dollar has little influence on the imported raw material but exerts a great influence on the downstream order. Orders export to the foreign market would decline and demand would be hard to return to the peak level a few years ago.

Finally, According to the China Customs, China imported 1,483,232 metric tons of polyethylene (PE) in August 2019, including 447,615 metric tons of LLDPE, 307,753 metric tons of LDPE and 727,864 metric tons of HDPE.





[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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