Asia Daily PP and PE Overview 08 August 2016

In China, futures market continues to post positive result as contract 1609 September delivery gained CNY142/ton ($21/ton) for PP and CNY40/ton ($6/ton) for LLDPE. Settled prices reported at CNY8440/ton ($1082/ton without VAT) and CNY9165/ton ($1174/ton without VAT) respectively.

Though futures prices open the week on firmer note, spot market remains cautious as players are expressing concern over the state of domestic supply in September, as futures contract 1609 is due for delivery.  Price list from domestic makers for both PP and PE are unchanged from last week while traders are complaining about difficulties they face in attracting buying interest.

A trader in Chengdu said, “We are offering some promotional package with aim to stimulate demand, however market respond is rather disappointed. We are holding about 3000 tons of PP cargoes on hand with expectation to catch another replenishment round before the National Day holidays. For the immediate term, we are not very optimistic.” Several other sources after visiting to their regular converter customers informed, “The PP sector is still in the off-peak demand season and indeed, most of our manufacturing buyers are having at least half a month of end product inventories despite low operation rate.”

Meanwhile, there are not many new import offers reported today, yet official homo-PP prices from a major Indian maker, which indicated some $60/ton reduction from last month has shown the weakness of the current market condition. A trader received the new price at $970/ton CFR China, LC 30 days term said, “We have referred to some of our customers and most indicated buy idea at $960/ton with the same term. Several other Middle Eastern makers have yet to announce new prices, however distribution market is gradually moving below the $1000/ton threshold now. We hope this would stimulate purchasing activities in the near term.” Import PE to the country witness no drastic movement and players are reported seeing better demand for HDPE yarn grade compared to other PE cargoes.

In Southeast Asia, market sentiment remains weak on the first trading day of the week and there are very limited numbers of new offers reported as players are observing further market movement before setting new prices. Non-dutiable homo-PP cargoes for August delivery from Singapore offers to Indonesia has reached $1090/ton CIF, LC AS term, some $30/ton lower than last week. A buyer received the offers commented, “We placed bid for $20/ton discount on deal, however our supplier refused to accept. We are having sufficient inventories to cover production need till early September; hence we might wait for a while longer before making fresh purchases. Demand for our end product is regular.”

Buyer’s tendency to postpone purchases with anticipation of seeing further discount in the coming days has encouraged local makers in Indonesia to reduce homo-PP offers in domestic market by approximate $60/ton from earlier week. However, supply condition has yet to remark any significant improvement. A trader in the country informed, “We are still having backlogs to clear, however, current demand is showing signs of slowing down.” There are also opinions that the large spread between local and import prices has attracted competitive cargoes from overseas suppliers and created an adverse impact on domestic ground.

Meanwhile, Vietnamese buyers are waiting on the sideline with speculation to see import homo-PP from Middle Eastern to breach below the $1000/ton threshold after several deals were concluded on the mark last Friday. A buyer stated, “We only procured a small quantity in the previous week, and currently waiting for market to reach our idea price of $980/ton CIF term to buy in larger volume. We think the probability is there given the current lethargic domestic condition.”

Import PE to the region sees little changes primarily due to lack of fresh offers from international suppliers. However, HDPE film appears to carry more downward pressure compared to other grades on the back of comfortable supply. In fact, a Southeast Asian producer informed, “We have increased number of HDPE film cargoes to offers to Vietnam this month and currently inviting buyers to place buy ideas prices. Local traders are not showing much interest claiming negative margins when resell to domestic buyers, hence we are focusing on converters at the moment. Weaker upstream costs are also supporting lower prices, however we prefer to monitor market respond before announce official prices.”

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