Asia Daily PP and PE Overview 04 August 2016

In China, futures prices on Dalian Commodity exchange continue to journey south although the extent of price reduction is limited. PP contract for September delivery inched down CNY32/ton ($5/ton) from the previous trading session while LLDPE contract only loss CNY20/ton ($3/ton). Both contracts settled at CNY8261/ton ($1063/ton without VAT) and at CNY9050/ton ($1165/ton without VAT) respectively.

Despite futures LLDPE witness a smaller drop today, spot PE market is not synchronously. Indeed, price list from major makers indicated CNY50-100/ton ($8-15/ton) reduction from yesterday while PP prices see no changes. Many traders have expressed their disappointment with the number of deals they could conclude today, as buyers reportedly stepped out of market after futures prices remain on soft note for several sessions in a row. A converter in Fujian reported to have stable end product demand, yet only buy hand-to-mouth basis to cover immediately need. The buyer said, “Our justification to not stock up is that we are not in the high demand season. Besides, we see traders are showing strong willingness to negotiate on deals, which could be due to mounting pressure from weak performing futures market. We prefer to stay cautious in our purchases.”

Demand for LLDPE film in China meanwhile is described as warming up since the peak agricultural film season would be after the Mid Autumn Festival in September. This explains to why buyer only source minimal quantity in local market, and that import prices at the upper end of the overall price range are facing stiff resistance in spite of limited availability. A trader offers Indonesian LLDPE film at $1230/ton CFR China, LC 90 days said; “We only have as small quantity to offer and at the moment inviting buyers to place bids. Initial respond is not meeting our expectation, yet we are not willing to reduce offer too much as supply tightness would continue to support the market in the near term.”

There are little changes in the import homo-PP sector, however the sentiment is weakening as traders portray some sense of difficulties they face in holding prices, especially when persistent softening futures market is discouraging buying activities.    

In Southeast Asia, the general sentiment has not seen any drastic improvement compared to the previous trading days while trading activities are varied across markets. Indeed, players in Indonesia showed some preliminary signs of restocking homo-PP material from the import market after a brief slow down. Most converters in the woven bags sectors reported to have satisfactory demand for end product, yet material on hand is running low. A converter commented, “We only have material to cover production needs till early September, hence we also source some cargoes from domestic market to reduce the risk of delayed import shipment. The gap between local and import prices are rather large. Meanwhile, we are monitoring further movement in the nearby major markets to gauge the likely price direction in the near term. For this, we prefer to purchase in small quantity.” Several deals for Singaporean and Vietnamese homo-PP to the country are reported at $1120/ton CIF Indonesia, LC AS term.

Meanwhile, Vietnam market is quieter after obtained discounts for deals on Middle Eastern cargoes in previous trading days. USA homo-PP cargoes reemerged in this market at $10-20/ton higher than the last deal two weeks ago, touching $990-1000/ton CIF Vietnam, LC AS term. A trader commented, “We prefer to stay on the sideline till we can see clearer medium term outlook. However, we think Southeast Asia market might not slide too much from the current levels considering firm stance in China. Demand in local market is very weak, only certain homo-PP injection grades can achieve better margins.”

The number of new LLDPE film offers to the region remains limited as the week proceed, which raise a strong concern amongst players about the state of cargoes availability. Besides, another question buyers are asking is that how far more would HDPE film prices slip in the near term, after Iranian cargoes concluded at $1095/ton CIF Vietnam, TT in advance term. Considering the current supply-demand balance, many players are expressing a rather pessimistic expectation on market prospect. A HDPE bag converter said, “We have a perception that price might see additional downward adjustment in the coming days. We have yet to receive Christmas orders for our end products, though several customers have placed regular contract till October. Supply is ample, and this would be the problem for any price hike attempt.”

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