Asia Daily PP and PE Overview 29 July 2016

In China, futures prices on Dalian Commodity Exchange finished the last trading day of the week on a diverged result. Contract 1609 September delivery for PP concluded at minor reduction of CNY14/ton ($2/ton) at CNY8206/ton ($1053/ton without VAT). Contract LLDPE meanwhile extended the firming trend, adding CNY150/ton ($23/ton) to reach CNY9165/ton ($1176/ton without VAT).

Domestic spot offers for both PP and PE continue to move north as fresh price list from local makers add another CNY50-100/ton ($8-15/ton) from yesterday. Buyers however appears to take a step back to monitor further development after three consecutive session of making purchases. A trader from Guangdong said, “Buyers are technically resisting higher price levels. However, we believed that local producers might open the new month with further hike given significant drop in total inventories at major maker’s warehouse.”

There is still a significant risk many players are being cautious of, that many PP converters in the country are still operating at low rate due to the off-peak demand season. A PP producer reported, “Most converters are holding high end product inventories at our recent visit to them. This week, traders are taking cargoes to leverage the arbitrage opportunity between futures and spot market, and this posted a significant risk for the near term outlook.”

There is no abrupt movement in the import market though several traders claimed to have sold out USA homo-PP cargoes to both China and Southeast Asia. Domestic traders are reportedly searching for prompt cargoes, preferably arriving in the next one to two week’s time, sources reported.    

In Southeast Asia, market appears to be slower on the last trading day of the week as falling energy values unnerved players in the polyolefins sector. There are very limited numbers of deals reported today and buyers are expressing a high level of caution about the near term outlook. A regional buyer received Saudi Arabia homo-PP at $1040/ton CIF Indonesia, LC AS term commented, “Weaker crude oil values are affecting buying interest, yet we think any possible downward movement in the near term would be limited as there is no clear sign of any sales pressure at the seller’s side. We are planning to replenish some quantity in the coming weeks to maintain our stock levels.”

Meanwhile, a regional producer planned to hold firm stance on the PP offers to both local and domestic markets with a source said, “We see other major regional PP makers are having low inventories stemming from plant shutdowns and this might support the general trend in the coming days. We have lifted domestic homo-PP prices by approximate $70/ton compared to last month, though we are facing some initial resistance, we believed buyers would accept the new levels due to lack of availability.”

Demand in Vietnam is especially stagnant, primarily due to the wait-and-see attitude buyers adopted in anticipation of further price reduction. Most offers at the upper end of the overall price range to the country are facing difficulties in attracting buying interest, though many sellers believed the lower end of the price range is nearing the bottom. An international trader said, “We collected bid from regular customers for Saudi homo-PP at $1010/ton and currently waiting for our principal’s confirmation on the final prices. We personally think PP market might extent the weakening trend in the coming week, however we are not seeing factors that could possibly drag offers down significantly.”

Demand in the PE market has not seen any real pick up, especially for HDPE film, as buyer remained focus on the fact the ethylene costs have retreated $30-35/ton from last week. However, average import HDPE film to the region stand below the theoretical costs. Trading activities in regional local market remain disappointed to many domestic sellers with Vietnamese traders complained about difficulties in concluding deals. Meanwhile, in Malaysia, buyers are not very much interested in the latest offers. A trader said, “Our small and medium size manufacturing customers are suffering from dropping end product business, hence most only buying on need basis. Our principal has yet to complete delivery cargoes to us since after the Ramadan holidays, for this we plan to just keep our replenishment to the minimal to avoid inventories risk.”

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