Asia Daily PP and PE Overview 20 July 2016

In China, Dalian Commodity Exchange appears to be taking a breathe from the continuous weakening trend observed in the past two session with contract 1609 for September delivery settled at little movement from the previous closing. PP futures inched up CNY38/ton ($6/ton) to reach CNY8051/ton ($1029/ton without VAT). LLDPE futures meanwhile shed only CNY25/ton ($4/ton) at CNY8875/ton ($1134/ton without VAT).

Trading activities in domestic spot market remain subdued in spite of further price cuts from local producers by CNY50-100/ton (8-15/ton) for both PP and PE cargoes compared to yesterday. With this, local prices have retreated a total of CNY100-150/ton ($15-22/ton) for PP in the first three trading days this week, while PE cargoes come down CNY150-300/ton ($22-45/ton) within the same period.

A trader in Beijing said, “Our customers are retreating from the market as most are expecting to see further reduction in the near term. Local spot market is rather, however we still managed to sell some quantity to traders, who are active in dealing with both futures and spot trading.”

Import PP market appears to have more movement as traders started to give more offers and open to negotiation. Players reported receiving homo-PP offers at $1030/ton for Indian origin cargoes and at $1035/ton for Saudi material, all based on CFR China, LC 30 days term. A trader commented, “Buyers are expressing buy idea at below $1000/ton threshold. However, we think suppliers might not rush to cut prices too quickly given the lack of sales pressure. Demand is a little slack at the moment, yet we believed that low stock on hand would encourage converters to continue purchasing on need basis, which in turn support the market.”

Traders in the PE market reported to have received a good number of inquiries from Vietnamese buyers to re-export LLDPE film to the country, however, most orders could not be fulfilled as regular imported LLDPE film availability in China is also very tight. Other local materials, including coal based grades are piling up in domestic market, yet sellers remain positive about the near term outlook due to the approaching agriculture season in northern China.

In Southeast Asia, sentiment has not witnessed any significant changes though trading activities in the import PP market is slightly weaker in Vietnam with a vague sign of price reduction. A major Middle Eastern producer announced new homo-PP prices to the market at $1070/ton CIF Vietnam, LC AS term, however, many buyers are placing bid for $50/ton discount given weaker domestic ground. Though the bids were rejected, sellers appear to show more willingness to negotiate now. A buyer reported, “Our supplier was willing to give us $30/ton discount from initial price, however, we decided not to proceed with purchases as we think market might down adjust a little bit more in the coming week.” Local homo-PP market is rather stagnant and players are showing concern that downward movement in the import ground would pressure domestic traders to cut prices to entice demand.

In contrast, local PP prices in Indonesia continue to move north as aggressive buying fuelling sellers’ support to lift offers. A major producer opens the fifth price list for this week, in which homo-PP gains for third consecutive sessions, accumulating some $30/ton increased from last week. A market source said, “Demand in local market is very healthy, from which we think there might be still room for prices to firm up again in the near term. We maintain positive outlook for Q3 in spite of the turnaround postponement at one of the local plant."

Most players in regional PE market are waiting for fresh offers from major Middle Eastern producers, which expected to be announced next week. Healthy demand for LLDPE film in Vietnam market continues to catch international sellers’ attention as several have claimed to achieve better margins here. Re-export Middle Eastern LLDPE film cargoes from China also appear in Vietnam at the range of $1235-1250/ton CIF, LC AS term. A trader received the re-export offer commented, “Domestic LLDPE film prices have reached VND32,000,000/ton ($1305/ton without VAT) due to lack of availability. However, we need to discuss with our supplier before taking fresh cargoes as the shipping time is a little too long.”

Meanwhile, prices at the upper end of the overall price range are still facing stiff resistance with a major regional producer announced prices for August delivery cargoes earlier this week at $40-60/ton increased from last month said, “Sales have been slower than expected as our customers are a bit reluctant with the new price level and this might hurdle further price increment in the near term.”

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