Asia Daily PP and PE Overview 11 August 2016

In China, futures prices on Dalian Commodity Exchange extended the weak trend, however, in a slower pace. Contract 1609 for PP settled CNY121/ton ($18/ton) lower from yesterday to reach CNY8212/ton ($1057/ton without VAT). LLDPE futures touch CNY9050/ton ($1165/ton without VAT), some CNY50/ton ($8/ton) softer than the previous settlement.

Domestic spot offers for PP are CNY50-100/ton ($8-15/ton) lower than yesterday though buyers are not totally discouraged from replenishing material given low inventories. Traders informed that they are still able to close deals for homo-PP yarn at smaller quantity than couple of days ago. Spot PE offers however unchanged from the previous session.

A trader in Shanghai said, “Sentiment in general is weaker following the plunged futures market. However, converters have not kept high inventories for sometime and the fact that some buffer stock must be taken before delivery constraint during the G20 Summit is retaining buyers in the market. Along with the absence of sales pressure at the seller’s side, we think market might sustain a more of stable trend for the remaining of August.”

Import PP market has not witnessed any abrupt movement with Oman homo-PP injection fetched deals at the level of $1000/ton CFR China, LC 90 days term. The long awaited agriculture film season has yet to show any high pitch and it is reported that most converters in this sector are still operating at about 60% capacity. Meanwhile, import HDPE film at the upper end of the overall price range is facing stiff resistance, which encourages sellers to step back on their offer. A trader cut Taiwanese HDPE film prices by $15/ton from last week said, “Buyers are not showing much interest and deals concluded are rather disappointed. We fear that the downward pressure might persist in the near term as demand in other markets are not encouraging too.”

In Southeast Asia, most offers remain unchanged from the previous trading session, however, purchasing activities for homo-PP in Vietnam once again pick up after a major Saudi Arabia producer announced new offers earlier than expected. It is reported that the supplier managed to sell out nearly 2000 tons of allocation after committed to $20/ton discount from initial prices, touching $1000/ton CIF Vietnam, LC AS term. Source closed to the supplier informed, “Most cargoes takers this time are traders. We believed this is not restocking activities since domestic supply is building up with the arrival of previous purchased cargoes and the widely available of near-prime material. There is an expectation amongst local traders that market has minimal room for further reduction.”

Meanwhile, purchasing activities in Indonesia are not completely smoothened, as buyers remained cautious, expecting further price reduction in the near term. An international trader commented, “Our customers are still trying to negotiate for further discounts despite having low inventories on hand. We are in no rush to cut our offers since we believed that price correction period is nearing to an end.” A major domestic producer down adjusted local homo-PP prices for second time this week, cutting IDR90,000/ton ($7/ton) from earlier this week, yet distribution market continue to complain about the sluggish demand condition.

It is interesting that a Thailand producer after directing more HDPE cargoes to Vietnam market earlier this week at surprisingly competitive prices; at the moment the producer appears to have some homo-PP quantity to offer as well. A source close to the producer informed, “We have a good quantity of homo-PP and we are inviting buyers to place bids or buy ideas. Most price ideas we received are similar to Middle Eastern offers. We are not able to accept such low prices at the moment since we can achieved better margins in other near-by markets.”

The regional PE market is rather quiet with very limited number of new offers observed. Ethylene costs in Northeast Asia region continue to fall in spite of several major shutdowns that were expected to support higher prices, unnerving buyers on the downstream PE market. A Malaysian producer sold LDPE film to Vietnam at $1220/ton CIF, LC AS term said, “Demand is very weak here and we only managed to conclude 200 tons of material this week. Compared to Vietnam, we can achieve better margins in other near-by markets, especially Indonesia. We hope market would pick up in the coming month due to preparation for the festive seasons.”

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