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In China, futures prices on Dalian Commodity Exchange today manage to reverse the weakening trend that take place in the past two session, though the gains are rather limited. September delivery contract for PP increases CNY34/ton ($5/ton) to settle at CNY8033/ton ($1029/ton without VAT). LLDPE contract meanwhile concluded at only CNY15/ton ($2/ton) higher at CNY8740/ton ($1120/ton without VAT).

Futures trade opens the day on the firmer note has encouraged local producers to maintain spot prices mostly unchanged from yesterday for both PP and PE cargoes. A positive sign is that buyers continue to make purchases at the lower end of the overall price range, which resulted in a drop of 9.8% in total inventories at major maker’s warehouse compared to the beginning of the week, though a large part of the quantity went to futures trading, sources said. A trader in Zhejiang sold local material at CNY7800/ton ($1000/ton without VAT) EXW China commented, “Our sales are satisfactory these two days though we could not achieve too high prices. We think domestic producers might maintain offers on the stable track for the remaining of the month due to reduced sales pressure.”

In the import market, players reported seeing some Middle Eastern homo-PP cargoes being re-directed to China at the level $1010/ton CFR, LC 30 day days term as a result of sluggish demand in other market. However, most suppliers with direct cargoes are still holding firm on their prices, refusing to breach below the $1000/ton mark though USA cargoes are creating downward pressure on the general market sentiment. A trader said, “Market might need time to move below this sensitive threshold, yet prices above $1030/ton level is facing stiff resistance at the moment.”

Buyers in the PE sectors are very cautious about the near term prospect after upstream costs fell to their lowest levels in a month. Major Middle Eastern maker opens fresh offers to the country at $1050/ton for HDPE film, $1100/ton for LLDPE film and $1100-1110/ton for LDPE film, all based on CFR China LC AS term. Buyers regarded these prices as competitive; yet refrain from making large purchases.

In Southeast Asia, there are some minor indications that buying interest for import cargoes is receding as buyer’s confidence got hit by falling energy market. Indeed, producers announced fresh prices in the previous trading days are now facing difficulties in convincing regional buyers to accept the fresh hike. An international trader offer homo-PP on behalf of a Saudi Arabia producer at $1060/ton CIF Vietnam, LC AS term, some $30/ton higher than last month. The source said, “We are collecting bids from our regular customers and most are asking for $1000-1010/ton levels. Even at this price, buyer’s quantity idea is just 100 tons at the higher end. We are discussing with our principal and might decide on the final price level soon.”

Weaker sentiment in the international market and the arriving of previous purchased cargoes has pulled down domestic prices in Vietnam as well. Traders in the country decided to step back on their homo-PP offers by VND200,000-400,000/ton ($9-18/ton) compared to earlier this week, yet market remain “strangely silent”, players said. Meanwhile, the strong buying activities observed in Indonesia market appears to be ebbing though there is no clear sign of any price cut at the moment. A converter in the country received offer for Vietnamese homo-PP said, “Our supplier hold firm on levels of $1130/ton CIF Indonesia but we placed bid at $30/ton lower. We have sufficient material to cover production needs till September and we might postpone our purchases to wait for better deal. Demand for our end product is regular at the moment.”

In the regional PE market, Middle Eastern LLDPE film supply remains tight and players expect this condition might prolong in the coming month. A distributor selling Saudi Arabia PE cargoes said, “Our principal could not fulfill our requirement for LLDPE film this month as they plan to focus on domestic Saudi market for the first half on August. We were informed that export allocation would only become available by second half of August.” A source closed to the producer has confirmed that they have very limited PE allocation this month.

In contrast, comfortable supply for HDPE film has an adverse effect on the prices, widening the price gap between HDPE and LLDPE film at the range of $70-100/ton. In addition, ethylene costs based on CFR Southeast Asia fell $25/ton on Tuesday, and industry sources are expecting further reduction in the coming days with perceived improved supply from Singaporean producers. This has created a very unfavorable condition for HDPE market in the coming weeks, players said.

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