Asia Daily PP and PE Overview 09 August 2016

In China, futures prices on Dalian Commodity Exchange inched higher for the second session in a row though the extent of increment is limited. Contract 1609 for September delivery settled CNY84/ton ($13/ton) higher for PP and CNY25/ton ($4/ton) for LLDPE. Both contract reached CNY8492/ton ($1090/ton without VAT) and CNY9160/ton ($1176/ton without VAT) respectively.

Domestic spot market gains support from firm futures trading and energy values as fresh price list for PP added CNY50-150/ton ($8-23/ton) from yesterday while PE offers see little changes. The upside is that converters restarted a new round of purchasing, pushing sentiment in local ground. A trader in Ningxia reported, “We managed to conclude 1000 tons of homo-PP today while holding on the remaining cargoes hoping to achieve better prices in the near term. Most of our customers are not having high inventories; hence they need to restock to avoid production disruption. In addition, the unexpected shutdown of Fujian Refining & Petrochemical Company Limited (FREP) plant might also support firmer trend in the coming days.”

Meanwhile, import cargoes that are set to arrive by second half of October 2016 are facing serious resistance due to market fear of a repeating down cycle as last year. However, Indian homo-PP cargoes seems to attract good buying interest after the producer cut offers by $60/ton from last month. A trader purchased the cargoes at offered price of $970/ton CFR China, LC 30 days term commented, “With such purchasing appetite for this cargoes, we think suppliers would become less likely in cutting prices too significantly in days ahead.”

Meanwhile, it is reported that demand for LDPE film has witnessed improvement in demand mostly from green house film manufacturing, sources said. A trader added, “We hope demand for LLDPE film would soon to come as well as the agriculture film season in just around the corner.”  

In Southeast Asia, market remains weak on the second trading days of the week though the number of new import PP offers to the region is rather limited. There are some early speculations that PP prices are nearing to the bottom with the support from firm upstream values and constraint supply. A trader in Vietnam informed, “Our major Middle Eastern supplier informed that they have sold out available allocation and might only re-open new offers next week. There is a strong sense of optimism and the supplier is planning a small increment in the next price announcement after achieved satisfactory sales results last week.”

Meanwhile, domestic traders in Indonesia are complaining about the persistent sluggish demand condition, from which offers in distribution market are apparently lower than producer’s price list. Buyers are constantly comparing local and import offers and underpinning the gap between two markets before making replenishment despite general low inventories on hand. A market source informed, “We have purchased a small quantity in the previous week and currently monitoring further development before enter fresh buy. We think there is still some room for prices to move lower in the near term given slower than expect demand condition. Our end product business is regular at the moment.”  

The HDPE sector continues to endure the downward course, acutely in Vietnam market after a major Thai maker slashed offers to conclude HDPE film at $1115/ton CIF Vietnam, LC AS term. Source close to the producer informed, “We have comfortable supply this month and willing to negotiate with volume buyers. Demand is rather slow here and buyers are very cautious about making purchases amid weak end product business.” For this, once again deals for HDPE film in Vietnam is lower than in China for the same origins. In contrast, LLDPE film remain on stable track though players are expected some minor corrections to take place as a spillover effect from falling HDPE film prices.

Market is also showing concern that ethylene costs in the region is softer despite several crackers shutdown that caused an approximate production loss of 360,000 tons. Details of these shutdowns are reported in the Plant Status section on www.commoplast.com. Market sources expected to see firmer ethylene costs after Chinese downstream plants return to normal production after the G20 Summit.

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