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In China, futures market closed at lower levels on the final trading day of the week, marking the fourth consecutive falling session. May delivery contract for PP inched CNY59/ton ($9/ton) lower to reach CNY9230/ton ($1145/ton without VAT) while LLDPE futures only slipped CNY20/ton ($3/ton) at CNY10250/ton (1273/ton without VAT).

Domestic suppliers continue to cut PE offers by CNY50/ton ($7/ton) from the previous trading day despite strong ethylene costs. Continuous falling futures prices are dampening buyer’s confident in the near term outlook, turning bullish expectation for the coming week into more of uncertainties. A trader informed, “There are many PE cargoes arriving to the port this week while our customers are still reluctant to buy in large quantity due to thin profit margins. If this condition persists, we think converters might continue to source on need basis in the coming week. Therefore, we are diverting some of our cargoes to Southeast Asia market.”

Meanwhile, PP supply in China remains tighter than PE, which explains to why there are not many re-export offers available at the moment. A trader based in Zhejiang added, “Besides, local homo-PP prices are quite high, hence suppliers prefer to sell in domestic market instead. The whole market is holding on their offers, hoping to see clearer trend in the coming week before implementing any other measures. We are uncertain about the demand condition, yet one thing clear is that market might not witness any significant drop given the current upstream market situation.”    

In Southeast Asia, there are very few new offers emerge in the final trading day of the week, though the firming trend remain in place. There is some interesting development show up in Indonesia’s PP market, in which the gap between dutiable and non-dutiable cargoes is getting narrower. Middle Eastern homo-PP offers reach $1160/ton CIF Indonesia today, surprised many conservative buyers with a source informed, “We also received offer for Vietnamese homo-PP at $1190/ton with the same term, only $30/ton higher than dutiable cargoes. Therefore, we think Middle East suppliers might face difficulties in achieving their hike target in Indonesia.”

On the other hand, regardless of the origins of the import cargoes, competition with domestic material is fierce. Despite tight supply condition stemming from a recent shutdown at one of the major plants in Indonesia, local suppliers have yet to take aggressive move in their offers. Buyers therefore, might turn to source their needed quantity in domestic ground if international sellers lift their offers too quickly.

In contrast, Vietnamese buyers are more aggressive in scouting for homo-PP material though market attention placed mostly on prompt cargoes. Local availability here is rather short due to lack of import arrival, players said. At the moment, deals for dutiable cargoes have reached $1135/ton mark and discussion with buyers shows that market is still interested in prompt cargoes even at slightly higher prices. A trader commented, “Our Saudi Arabia supplier adjusted their homo-PP offers to $1170/ton toward end of the week. We are seeking to replenish some quantity, yet there is not much availability.” Meanwhile, a Korean producer has lifted their homo-PP yarn and injection offers by $40-50/ton compared to last week, reaching $1200/ton CIF Vietnam, LC AS term. This cargo is exempted from import duty of 3 per cent. With this, import homo-PP to Vietnam extended the range to $1100-1200/ton CIF, LC AS term.     

In the PE sector, it is interesting that more re-export offers emerged in Vietnam for both HDPE and LLDPE film, though prices remain at high level, ranging from $1250-1260/ton for both grades. In spite of the promptness of the cargoes, buyers in the country do not appear to be attracted to the offers due to high prices. A trader informed, “We received offers from three different Chinese suppliers at the similar price range. However, Vietnamese buyers are not ready to accept such high offers for PE cargoes, especially HDPE film. China market is a bit weak this week, and if demand in this market pick up in the coming day, it would stimulate buying interest in Vietnam.”

Regional players continue to expect tightening PE supply in the coming month, including HDPE, LDPE and LLDPE film, given a series of production issues at major producers’ plants. Prices therefore might hold firm in the near term.