Asia Daily PP and PE Overview 01 August 2016

In China, PP futures on Dalian Commodity Exchange posted a moderate gain on the first trading day of the week, adding CNY62/ton ($9/ton) from last Friday. At the meantime, LLDPE futures jumped CNY210/ton ($32/ton) on improved market prospect. Both contracts settled at CNY8293/ton ($1071/ton without VAT) and CNY9350/ton ($1207/ton without VAT) respectively.

Domestic spot market has also firmed up in a good range of CNY100/ton ($15/ton) for PP, CNY100-150/ton ($15-23/ton) for LLDPE film and CNY50-100/ton ($8-15/ton) for other PE grades. A positive sign of today’s trading session is that traders see some signs of a pick up in LLDPE film demand as converters in the agricultural film sector starts replenishing inventories ahead of the traditional high demand season. Though purchasing activities are not as strong to support significant price increment, most sellers are expressing positive expectation in the near term. A trader informed, “We visited our regular buyers and good news is that most have lifted operation rate to around 60% by now. Together with firm futures market, we do have positive expectation for the near term outlook.”

Import market sees little movement with most mainstream homo-PP cargoes from Middle East and India remain at the level $990-1030/ton CFR China, LC 0-90 days term. A trader offer Saudi cargoes at the lower end of the price range said, “Buyers are very reluctant with our cargoes as many are still expecting to see further discounts. However, we believed that with the support of firming futures and domestic markets, import ground would be able to hold its stand in the coming days.”

Traders having LLDPE film cargoes on hand are planning to divert their attention to Northern China area given better demand in this area, in line with the agriculture film season. However, at the moment most transactions are focused on domestic market basis with a source commented, “We do expect better condition in the coming days, as most converters were holding minimal inventories on hand and they need to replenish to maintain stock levels.”  

In Southeast Asia, market opens the new week on softer note as deals are concluded at discounts though offers in the import market remain mostly unchanged from previous week. The regional PP market starts to show some clearer sign of a down trend with a major Middle Eastern producer offers homo-PP offers at $1040/ton CIF Vietnam, LC AS term; yet concluded deals at $30/ton discounts from initial price. A buyer purchased two containers of this material at $1010/ton of ton said, “We prefer to buy slowly as we think market might not witness any significant reduction in the near term. Domestic market is very slow as improved supply and weak energy market is dampening buying interest.”

It is important to note that import homo-PP to Vietnam and China are now traded at similar levels, against the typical gap of about $30/ton, spark speculation that prices in either of these market must have correction. Players are divided in their opinions about the likely direction in the coming days, hence most prefer to hold cautious stance instead of taking position.

Meanwhile, homo-PP from a Saudi Arabia major to Indonesia also dropped $10/ton week on week basis; however, buyers are not showing much buying appetite. A converter expressed his expectation, “The down trend might just begin, and hence we prefer to hold our purchases in bid to get better deals in the near term. We are having sufficient material till early September while end product demand is rather mediocre.”

There is minimal number of new PE offer in the import market while couples of regional producers are collecting bids for HDPE cargoes before setting prices. In domestic Indonesia, a major local producer lifted LLDPE film prices by $10/ton from last week, however, buyers are receiving discount of $20/ton for HDPE film and $10/ton for LLDPE film in the distribution market. The state of demand disappoints many traders while the start of schooling season might affect end product demand in the immediate term, players said.

In the plant status news, Japan’s Mitsubishi Chemical unexpectedly shutdown its naphtha cracker in Mizushima due to problems at the heat exchanger equipment. There is no confirmed restart date at the moment though the company is investigating in to the issues. The cracker is designed to produce 570,000 tons/year of ethylene and 320,000 tons/year of propylene. The shutdown is expected to impact the ethylene market in the near term, market sources said.

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