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In China, futures prices on Dalian Commodity Exchange recorded another impressive rally on the first trading day of the week with contract 1609 for PP jumped CNY399/ton ($60/ton) while LLDPE futures skyrocketed CNY445/ton ($67/ton). Both contract settled at CNY8379/ton ($1079/ton without VAT) and CNY9435/ton ($1214/ton without VAT).

With the support from drastic hike in futures trading, spot offers for PP strike the biggest daily gain over the past three weeks at CNY350/ton ($53/ton) increased while PE cargoes added CNY200/ton ($30/ton) from last Friday. It is reported that purchasing activities are rather sluggish though traders are generally very optimistic about the near term outlook in the absence of sales pressure. A converter in Fujian explained, “We think this rally has been taking too long even without fundamental support from the demand side. Our end product business is in off-peak season now, hence we prefer to hold cautious stance until our business improve.” Domestic traders meanwhile are not appearing to be in rush to deplete on hand cargoes and some withdrew their offers by the second half of the trading day with anticipation of seeing higher prices in the near term.

Import market has also followed north as trader opened limited number of PE offers at $10-20/ton higher than last week. A trader sold Iranian LDPE film at $1185/ton CFR China, LC 90 days said; “We believed that market would remain on the rise in the near term, hence we prefer not to sell too aggressively with hope to achieve better margins. Our on hand inventories is rather low as most of our cargoes got delayed due to Ramadan holidays.” This, however, is regarded as a “high risk” supportive factor considering the state of supply once Middle Eastern cargoes arrive to the market.

Import offers for homo-PP at the lower end of the overall price range is vanishing from the market on overwhelming speculation of continuous supply tightness as G20 Summit is drawing near. Majority of Middle Eastern homo-PP offers are reported at $1040-1060/ton CFR China, LC 0-90 days term todays despite weak buying interest.

In Southeast Asia, there are very limited activities observed mostly due to the lack of fresh offers from international suppliers and the absence of buyers in Indonesia and Malaysia due to Ramadan holidays. Import Indonesian LLDPE film continues to firm up in Vietnam with a trader said, “We lifted prices by another $10/ton from last week and currently monitoring market respond. We think buyers would eventually accept high levels given strong upstream costs and lack of cargoes from other major producers.”

Indeed, regional buyers have not seen any improvement in LLDPE film supply from international market given several unexpected plant issues. An international trader commented, “We are not expecting any supply relief in the coming days as our Singaporean supplier was forced to shut one of the LLDPE lines for an unspecified period on technical glitches. For this, we expect the current firming trend to persist in the near term.”    

Coming back to Indonesia, a major domestic producer has announced new prices to local buyers with $10/ton higher for LLDPE film only, while other grades remain unchanged. In Vietnam, it is reported that buyers continue to check on certain Middle Eastern HDPE film grades, which keeps domestic market stable to slightly firmer compared to late last week. However, the number of deals concluded is rather disappointed, sources said on Monday.  A trader concurred, “Converters simply refused to replenish large quantity due to lack of end product demand. The only factor that holds the market at the moment is the supply tightness, hence we prefer to take cautious stance in keep inventories.”

Regional PP market also sees minimal activities, yet most players are not expecting any reduction in the near term given strong sentiment in the nearby China market. An international trader expressed his view after checking with several suppliers on the new offer levels, “Non of the suppliers we contacted open offers today. It is hard to determine the medium term trend, however, we are betting high on firmer prices in the near term.”

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