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In China, futures prices on Dalian Commodity Exchange continue to move south, extended the falling trend to seven straight sessions. PP contract for September delivery inched CNY61/ton ($9/ton) lower to reach CNY7687/ton ($954/ton without VAT). LLDPE contract only reduced CNY30/ton ($4/ton) to settle at CNY8820/ton ($1094/ton without VAT).

Sentiment in the domestic ground has been dampened due to persistent weakening futures market. It is reported that some sellers have conceded to larger discount of CNY200/ton ($29/ton) for both PP and PE today. However, local spot offers for homo-PP is still approximately $30/ton higher than futures contract, which eliminates the arbitrage opportunity for many traders.

“We managed to conclude some LLDPE and homo-PP cargoes today after agreed to discount. Many of our manufacturing customers are facing slower than expect end product demand, which resulted in higher end product inventories than raw material’s. The upcoming conference meeting of China's Belt and Road Forum for International Cooperation (BRF) has also forced a number of factories to shutdown to ensure the air quality. Therefore, we do feel less optimistic about the near term outlook.”

Buying interest in the import market witnesses similar situation and buyers continue to place bid at well below the offered level. A trader received bids for Saudi’s LLDPE film at $1130/ton CFR China, LC 0 days term, some $40/ton below the offer levels. The source said, “Buyers are just too aggressive in their bids. We might not be able to meet such low idea at the moment, however, we are also monitoring further developing before making conclusive decision.” The source also reported of difficulties they face in re-exporting PE cargoes to nearby Southeast Asian market given insufficient margins.

In the PP sector, there are some rumors about import homo-PP at below the $1000/ton threshold emerged in China today, however, it is not confirmed at the time this report is published.

In Southeast Asia, there are more signs emerged in the market indicating softer trend for import homo-PP, especially to Vietnam. Several international and regional traders have initiated discount of $10/ton on import homo-PP offers to Vietnam from last week while prices above the $1100/ton threshold are facing stiff buyer resistance.

A Chinese trader reduced re-export offers for Russian and USA origins homo-PP to Vietnam to $1080/ton CIF, LC AS term said, “We have concluded couple of deals at this levels to Vietnam. At the moment, we are also seeking opportunity in Indonesia market, however, prices might be slightly higher due to shipping costs.”

Despite the lack of direct offers from major Middle Eastern suppliers, Vietnamese buyers hold strong belief that the PP market has reached the peak. However, buyers are not expecting any significant reduction in the immediate term with a source added, “We think market acceptance might hover in the range $1080-1090/ton CIF term. Supply for mainstream origins is still tight, which might prevent any drastic movement.”

Meanwhile in Indonesia, couples of Southeast Asian producers are giving indicative offers for homo-PP at lower levels as domestic suppliers pursue penetration pricing strategy. “We are still receiving orders from Indonesian customers, however most at small quantity. Competition is fierce in local ground and we are not very confident about the near term outlook,” a Vietnamese trader said.

Meanwhile, demand for HDPE film in local Vietnam market remains healthy, especially for certain Saudi origin grades. Very few supplier open fresh offers today, though it does appears that firmer ethylene costs might give greater support to the PE sector. A trader offered Kuwait’s LLDPE and HDPE film at $1170/ton CIF Vietnam, LC AS term said, “Market again enter the tug of war between slow demand and high production costs at the seller’s side. International suppliers are in no rush to reduce offers despite dropping demand in Western market, which might indicate the lack of sales pressure. Therefore, we prefer to hold firm on our cargoes.”