Asia Daily PP and PE Overview 18 July 2016

In China, futures prices on Dalian Commodity Exchange begin the week on a soft note as both contracts for PP and PE settled lower. September delivery PP futures dropped CNY104/ton ($16/ton) while LLDPE inched down CNY90/ton ($13/ton) from last Friday. The settled prices stand at CNY8068/ton ($1034/ton without VAT) for PP and at CNY9010/ton ($1155/ton without VAT) for LLDPE.

Weakening futures trade further dampened the market sentiment aside news about several PP plants would only reduce operation rate instead of shutdown completely during the G20 Summit. This has triggered expectation that impact of the world event on the supply might not be as significant as market anticipated. A converter in Fujian purchased one container of domestic homo-PP after received CNY50/ton ($8/ton) discount said, “We have been sourcing on need basis for sometime now as we think the current firming trend is mainly stimulated by futures trading. Our end product is in the slack season and hence we are operating at lower rate. We think the current trend has lasted long enough, and there might be further reduction in the near term.” Fresh price list from domestic makers indicated some cutback of CNY50/ton ($8/ton) for PP and CNY50-100/ton ($8-15/ton) for PE.

There are very few new offers observed in the import market, which players attributed to the fact that sellers are monitoring the market before setting fresh price lists. Traders in the PP market are still holding very firm stance on their offers in the range $1030-1050/ton CFR China, LC 0-90 days term. However, the sluggish buying interest has had many traders wary about the near term prospect. Some have mentioned about diverting cargoes to other markets, yet at the current price gap, there is simply not enough margins for re-exporting to SEA markets.

In the PE area, a major Middle Eastern maker stepped back on their LLDPE and LDPE film offers to the country by $30/ton from last week to reach $1160/ton, CFR China with a distributor commented, “Buyers were really reluctant with our previous prices last week due to weaker futures trading. And even at the current level, we have not been able to conclude any deal yet.” However, the prospect for LLDPE film is perceived to be better than others as the agriculture season is just around the corner.

In Southeast Asia, market opens a fresh week with several regional producers announced August delivery cargoes at higher levels than last month. Trading activities are reported to be slightly subdued in the import market, as buyers prefer to monitor further development on the first trading day. A major Malaysian producer lifted homo-PP prices to Indonesia by $50/ton from last month to reach $1200/ton CIF, LC AS term. Source close to the producer commented, “We have very limited quantity of homo-PP this month, hence we plan to hold firm on our prices. There is insufficient supply in local market and for this, we believed that buyers would gradually accept the new offers.”

Indeed, the local PP market in Indonesia appears to regain its “hotness” as a major domestic maker lifted homo-PP prices twice today, accumulating a total of $20/ton gains from the pre-holidays levels. A market source commented, “Local sellers are very optimistic about the near term outlook as demand normally pick up from late Q3. Besides, supply is relatively tight at the moment hence we think PP market would sustain the current firming trend longer.”

The Vietnam PP market is rather stagnant domestically despite there are very limited cargoes available. Sellers are complaining about difficulties in lifting local offers though there is a deal for Middle Eastern homo-PP reported at $1080/ton CIF Vietnam, LC AS term, some $20-30/ton higher than last week for the same origin. A seller said, “Buyers are waiting on the side-line hoping to achieve some discount next month once more cargoes arrive and alleviate the current tightness. We feel it is very difficult to attract buyer’s attention at prices above VND27,000,00/ton ($1100/ton without VAT) FD term for locally held Middle Eastern cargoes.”

The regional PE market also received a good number of new offers, especially for HDPE cargoes, mostly with increases from last week. Many players regarded the current firming PE prices as more sustainable than PP given strong upstream market, expected of the approaching high demand season starting August and lack of availability. However, prices at the upper end of the overall price range continue to face stiff resistance. A major Thailand producer up adjusted their HDPE prices to Vietnam by $10/ton from last week to reach $1195/ton CIF for film, injection and blow moulding grade. Source from the producer informed, “Buying interest has not shown much improvement from last week; however we decided to test the market respond first before taking further measures.”

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