China PP, PE Markets Strengthen as September Begins with Oil and Futures Rally

China’s PP and PE markets have opened September on a firmer note, supported by higher crude oil prices and strong gains in Dalian futures after a relatively cautious close to August. Domestic prices have moved upward, while import and export indications have also strengthened.

The traditional peak season is beginning to provide more visible support to demand, particularly in some PE segments. However, market participants remain cautious about the durability of the rally, as supply is expected to increase in the coming months and recent price gains have been driven largely by higher costs and futures rather than a major improvement in underlying fundamentals.

Dalian Futures Rally Supports Market Sentiment

The strong performance of Dalian futures at the beginning of the week has been a major factor behind the renewed bullish sentiment.

January LLDPE futures rose CNY 272/ton ($41/ton) on August 31 and gained another CNY 189/ton ($28/ton) on September 1. January PP futures increased by CNY 276/ton ($41/ton) on Monday and added another CNY 169/ton ($25/ton) on Tuesday.

The futures gains coincided with a sharp rise in crude oil prices. November Brent crude increased by $2.39/bbl to $90.49/bbl on Monday, providing additional cost support to the polymer market.

Domestic PP and PE prices responded by moving higher, while import and export markets also followed the firmer direction.

In the domestic PP market, homo-PP raffia and injection prices increased by around CNY 150/ton ($22/ton) from the previous week. PE film prices recorded more varied increases of approximately CNY 100-400/ton ($15-60/ton) depending on the grade.

This represents a clear change from the cautious market conditions seen toward the end of August, when buyers became increasingly unwilling to follow higher prices after the previous rally.

PE Demand Shows Early Seasonal Improvement

Demand has become somewhat more supportive with the arrival of September. Although downstream consumption remains moderate overall, market participants are reporting a noticeable improvement from August as the traditional high-demand season begins.

The improvement has been particularly visible in agricultural films in northern China, where manufacturers are gradually receiving more orders and increasing operating rates.

A Chinese trader said agricultural film demand in northern China is picking up gradually, with rising orders supporting higher production rates and relatively stronger demand for raw materials. However, the trader expects PE prices to fluctuate in the coming days as improving seasonal demand is balanced against expectations of higher production.

Another trader noted that the market is beginning to experience the seasonal recovery that was largely absent in August. However, it remains too early to consider the improvement a broad-based surge in demand. Buyers are still expected to remain selective, especially following the rapid price increases at the beginning of September.

PP Sentiment Improves Despite Uneven Demand

PP sentiment has also strengthened, although market participants have different views regarding the extent of the seasonal demand recovery.

One trader attributed the recent price increases mainly to the sharp rise in futures compared with the previous week. The trader also pointed to tight supply, low inventories and reduced operating rates, particularly in eastern China. Some producers have reportedly lowered operating rates because of weak margins.

Despite these supply constraints, downstream demand remains relatively weak, with no clear signs yet of a strong peak-season recovery. Buyers have shown interest in offers but are mainly purchasing according to immediate requirements. Transaction activity was described as average.

Nevertheless, the trader expects the PP market to remain firm in the near term.

Another PP trader also linked the latest price increases to the futures rally and said overall market sentiment had improved. Supply remains tight for certain grades, including raffia, fiber and PP block copolymer, while the overall PP operating rate is around 71%.

Downstream activity has improved as the market moves out of the off-season, with operating rates showing some recovery. However, buyers continue to purchase mainly on a need basis. Higher costs, tight supply and strong futures are expected to provide continued near-term support.

Supply Growth Remains a Key Risk

Market feedback indicates that the seasonal recovery is becoming more visible, but it has not yet developed into a broad-based acceleration in purchasing.

At the same time, several producers are preparing to restart units, while additional planned maintenance is expected at some facilities. This could result in higher overall production in the coming period.

New PP capacity scheduled to come online later this year will also remain an important factor for the market. Therefore, while stronger crude oil prices, futures and improving seasonal demand are supporting prices at the beginning of September, the market will continue to watch supply growth and the sustainability of downstream demand closely.

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