Asia Daily PP and PE Overview 19 July 2016

In China, futures prices on Dalian Commodity Exchange continue to journey south, though the extent of price reduction for PP contract is rather limited at only CNY57/ton ($9/ton) from yesterday. Meanwhile, LLDPE futures shred as much as CNY225/ton ($34/ton), worrying many players. Both contract settled at CNY8051/ton ($1027/ton without VAT) and CNY8845/ton ($1128/ton without VAT) respectively.

Domestic spot offers declined further on fresh offers from domestic makers, however, buying interest is also moving on the same direction. Price list indicated a reduction of CNY50/ton ($8/ton) for PP and CNY50-100/ton ($8-16/ton) for PE cargoes; yet traders reported receiving bids from buyers at CNY500-600/ton ($75-90/ton) below price list levels. A trader in Shandong said, “We have some cargoes on hand now and several others are due to arrive soon. Our regular customers are mostly holding wait and see stance as they hope to received further discount in the coming days. We are now hoping that pre-G20 purchase would stimulate the market in August.”

Official Circular from government declared 1-7 September 2016 to be public holiday at nine major cities of Hangzhou and all heavy trucks are restricted from being on the road. Players are expecting to see some replenishment activities before the holiday, though many placed bids on post-holiday purchases, as buyers might want to wait for producers to resume operation to determine the supply levels before making decision, especially when new coal based plants are planning to come online.

Import homo-PP from dutiable origins remains mostly stable, though prices at $1020/ton re-emerged after a brief absence. Several deals at this lower end level are reported today. There are also little movements in the import PE market and prices at the upper end are facing difficulties in attracting buying interest. Irregular HDPE cargoes from Brazil and Mexico are also showing up in China at relatively more competitive prices; yet market reported seeing little interest due to long shipping time.

In Southeast Asia, sentiment remains firm on the second trading day of the week with limited number of new offers observed, while buyers are in the negotiation process for cargoes announced yesterday. The import PP market is quieter than usual and there is a small offer for Saudi Arabia homo-PP at $5/ton lower than at the beginning of the month for the same material at $1065/ton CIF Vietnam, LC AS term. A buyer received the offer commented, “The supplier is giving us some space to bid, however local market is very slow as previous cargoes are due to arrive soon, which encourage traders to take more aggressive stance in moving cargoes. We think the PP market is near to the ceiling, hence there might be some correction in the near term.”

Meanwhile, a major domestic maker in Indonesia continues to up adjust local homo-PP offers by another $10/ton from yesterday on the back of healthy demand. It is reported that most converters in the country just fully return to operation this week with low stock on hands, therefore replenishment is necessary. A trader said, “Sales are good this week and we are moving cargoes at full prices. However, we are not very confident about the sustainability of this trend as buyers might slow down if end product business does not improve in the near term.”

The regional PE market appears to be calmer today and several buyers are in mid negotiation for August delivery cargoes with major Southeast Asian producer. A Vietnamese buyer received Malaysian LDPE film offer at $1250/ton CIF Vietnam, LC AS term said, “Our supplier lifted prices by $60/ton from initial offer last month. We have yet to discuss about conclude prices, however we have booked some quantity for now. The PE market in local ground is still strong given tight availability, and we think this trend might prolong in the coming month as the high seasonal demand is around the corner.”

Elsewhere in the region, players are watching the successful restart of Shell’s cracker in Singapore and PetroRabigh’s cracker in Saudi Arabia, which might extent some impact on the ethylene market, sources said. This might also affect the near term prospect for the downstream PE sector, however, many maintain very positive expectation with the support from the approaching high seasonal demand while number of Asian crackers enter maintenance season starting August.

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