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Insight | Time:Jan 31 2018 2:42PM
Is there still momentum in LLDPE futures before the holiday?
 
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Since the beginning of 2018, LLDPE futures market has been through a choppy way. The most actively traded contract, May contract, has firs risen from 9,800yuan/mt to around 10,200yuan/mt, where the uptrend was blocked and price was hit down to around 9,800yuan/mt, where strong supportive power was felt and price ramped higher again. Till last Friday (Jan 26), the futures contract closed around 10,010yuan/mt, above a threshold of 10,000yuan/mt, incurring people’s wonder about whether the contract could break through the upward limit 10,200yuan/mt.

Is there still such power for LLDPE futures to head north and break the psychological line of 10,200yuan/mt before the Chinese Lunar New Year holiday?



It is worth expecting that PE market may still ramp up in short.

First, import volume in Dec has fallen below expected rate, and port inventory may be limited before the holiday. In previous months, insiders have projected that Dec arrival might be an astonishing high rate, around 1.2 million tons. However, the actual volume is below 1.1 million tons, around 1.087 million tons, including 291.5kt of LLDPE, also lower than expected. Therefore, the risks of high import arrival’s pressure is lifted for Jan 2018.



Second, plastic stocks in petrochemical plants have lingered low. The rate on Jan 26 only recorded as 535kt, a comparatively low place in recent years. Normally when the stock rate hits that low, market demand is healthy, and based on that, market has a solid basis to rebound up in later period. For the commodity-grade LLDPE, it is easier to attract bullish speculators when positive factors gather together and pull the price higher.



Furthermore, the Chinese Lunar New Year in 2018 comes later than previous years, in mid Feb, and restart of downstream plants may till Mar. Downstream is more inclined to prepare more stocks before the holiday, and production could be higher than previous years. It is also a boost for the market before the holiday, but only move part of demand to earlier days. Based on market survey, downstream plants may continue restocking for at least one week.

With these mentioned reasons, positive factors still take an upper hand in LLDPE futures, and may push prices to the hindering line of 10,200yuan/mt in Jan. But for market after the holiday, there could be more uncertainties over demand, imports, and so on.
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