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In China, futures market unexpectedly dropped after two straight winning sessions. September delivery contract for PP inched CNY21/ton ($3/ton) lower to reach CNY7714/ton ($970/ton without VAT). LLDPE contract fell CNY30/ton ($4/ton) to CNY8830/ton ($1110/ton without VAT).

Buyers in domestic spot market continue to source hand to mouth basis though there are couples of PP producer decided to cut operation rate as a result of negative margins. In fact, on an average, domestic homo-PP yarn in China stands at about CNY7695/ton ($964/ton without VAT), EXW China, cash term – which is below theoretical costs based on current propylene prices. “We think the up-side of propylene market is rather limited given weak PP demand at the moment. In order for non-integrated producers to cover the costs at the present PP level, propylene would have to be around $800/ton.” No expectation for a strong rebound in PP market in the near term discussed as woven bags industry is in off-peak season.

In contrast, it is reported that demand for flexible PE packaging is more stable, “Just that buyers are delaying making large purchases due to comfortable local supply. Customers we visited mostly having steady end product business but continue to wait for extra discount.”

In the import market, major Thailand producer started to take firmer stance on LDPE cargoes to China while cutting metallocene by $20/ton from last week. Players reported that there is no offers for HDPE due to the on-going maintenance shutdown at one of the lines. A market source added, “We have not seen LLDPE c4 film offers from the producer in a while too as the maker is switching to make metallocene grade. We have already received some orders for LDPE heavy duty from customers in the agricultural film sector and we hope to conclude more deals in the near term.”

Trading activities in Southeast Asia are still limited though buyers in Malaysia and Indonesia are gradually returning to work after the long Ramadan holidays. Sales for Middle Eastern LLDPE film after suppliers agreed to $1080/ton level remain slow in Vietnam, partially due to soft local market that discourages replenishment from import ground.

A regional trader offered Kuwait LLDPE film at $1080/ton CIF Vietnam said, “It is very difficult to attract sales and most buyers we approached prefer to be cautious. We only have a small quantity left and we hope to deplete the cargoes soon.” Couple of other sellers are also facing similar situation despite being able to conclude few hundred tons of material at the mentioned price levels.

Meanwhile, Malaysian buyers are awaiting fresh local prices from a major domestic producer with much anticipated of further reduction considering soft international market. A converter commented, “We are still unable to gauge how much July offers would go down, however we belief that there must be additional cut. End product businesses would normally be slow after the holidays, and there might be a slight delay before the year end preparation.”

In the regional PP market, more traders decided to offer discount of their Philippines homo-PP cargoes to Vietnam after several deals were reported at $1040/ton in the previous trading session. This makes near term market outlook become uncertain than ever as divergent factors emerged. A Vietnamese buyer commented, “Even with firm upstream cost, we are not feeling the urge to make replenishment. The on-going shutdown at PetroVietnam does not seem to stimulate local market, instead traders are cutting prices.”

In Indonesia, there are very limited numbers of new offers observed, yet sellers hold more confidence about the near term demand prospect than in other market. An international trader sold Saudi Arabia homo-PP at $1060/ton CIF Indonesia, LC AS term before the Ramadan said, “We are positive that Indonesian buyers would accept new prices at $1070/ton once market is back from the holidays. This is because local supply is not high while most buyers are not holding comfortable stock on hand.”