Asia Daily PP and PE Overview 26 July 2016

In China, futures prices on Dalian Commodity Exchange continue to fall, portraying a bearish expectation for the medium term outlook. September delivery contract for PP inched down CNY44/ton ($7/ton) from yesterday’s settlement at CNY8018/ton ($1026/ton without VAT). LLDPE contract meanwhile, fall in faster pace, slashing as much as CNY145/ton ($22/ton) to reach CNY8730/ton ($1117/ton without VAT).

Domestic spot offers witness another CNY50-100/ton ($8-15/ton) reduction on both PP and PE for the second straight session. However, it is reported that trading activities have pick up as buyers show some interest in replenishing cargoes at the lower end of the overall prices range, especially for homo-PP.

A trader in Ningbo sold local homo-PP cargoes at CNY CNY7950/ton EXW China ($1017/ton excluding VAT) said, “It appears our customers are gradually accepting cargoes after discounts are given amid high level of uncertainties market poses. We personally think that domestic ground might not witness any hard landing this time since market conjectures about G20 Summit could possibly lift sentiment by the second half of August; and that demand should come back after the holidays declared in conjunction with the G20 event in line with the preparation for the National Days in early October.” The source also managed to conclude deals for Japanese homo-PP cargoes at $1000/ton CFR China, LC AS term.

Import homo-PP from regular sources including Middle East and India remains limited, players informed. However, increasing number of USA cargoes is catching market attention and as reported earlier, traders are up for purchasing after obtain discount. “We purchased 1000 tons of homo-PP yarn cargoes from this origins with $20/ton discount at $960/ton CFR China, LC 90 days term. Shipment is a little long, yet we feel confident about the near term outlook.”

Import PE to the country has yet to see any drastic movement with HDPE film cargoes arrival extends the pressure on current market. Meanwhile, a Saudi Arabia maker announced LLDPE film prices for August delivery at $10-20/ton reduction compared to last month, which surprised many players, who were expecting to see firmer prices as the agricultural film season drawing near.   

In Southeast Asia, several other Middle Eastern producers have announced fresh prices list to the regional market at increases from last month. However, buying interest, especially in Vietnam is fading due to perceived of surging domestic supply with the arrival of previous purchased cargoes. Import homo-PP offers from Middle Eastern supplier remain in the range of $1040-1080/ton CIF, LC AS term. Yet, irregular cargoes from the USA are concluded at below $1000/ton mark, sources informed on Tuesday. A buyer purchased the cargoes at $980-985/ton planned to use the material for production instead of trading given suitable specification. Meanwhile, another buyer received the offers at $1000/ton CIF Vietnam informed, “The supplier opened prices for approximate 2,000 tons allocation; however we did not proceed further as we think weakening energy market and the arrival of previous cargoes would further dampen buying interest in local market. This in turn would also impact the import ground. We prefer to hold wait and see stance in the coming days to monitor further movement.”

Elsewhere in the region, a major Malaysian producer lifted domestic offers for homo-PP cargoes by MYR280/ton ($70/ton) compared to last month on supply issues. A trader commented, “Our principal was having some plant issues in the previous month, hence there is no sales pressure. At the meantime, buyers are showing resistance towards the new price levels, claiming slow end product demand. We might face difficulties in concluding deal this time.”

Meanwhile, LLDPE film continues to lead the firming trend in the PE sector for August delivery cargoes. Indeed, major Saudi maker up adjusted LLDPE film prices to Vietnam by as much as $70/ton compared to last month to reach $1230-1240/ton while HDPE film only inched up $10/ton at $1150/ton. A trader received the new offer commented, “The gap between LLDPE film and HDPE film is a little too large this time. We are planning to place bid at $50-60/ton discount on LLDPE cargoes given the fact that domestic market has slowed down significantly. Weakening energy market might also impact the general sentiment in the near term. For this, we think taking cautious stance might be a better option.”

Concern over the failed coup in Turkey that forced the government to declare three month state of emergency continue to linger among Asian players, who expected to see increased number of cargoes to be diverted to the region as a result of possible falling demand in Turkey. Industry expert said that there is no immediate impact on the polyolefins industry, however, prolonged unrest would lead to weakening currency exchange rate and dampen buying interest for import cargoes. In addition, import could face disruption in case political atmosphere in the country deteriorates.

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