Asia Daily PP and PE Overview 12 August 2016

In China, the Dalian Commodity Exchange regains its strength just on the last trading session of the week. Contract 1609 for PP inched up CNY22/ton ($3/ton) from yesterday to reach CNY8235/ton ($1058/ton without VAT). LLDPE futures also added CNY30/ton ($5/ton) touching to level of CNY9050/ton ($1163/ton without VAT).

Most domestic spot offers remain unchanged from yesterday, except LDPE film prices are up CNY100/ton ($15/ton) as traders claimed to have better sales for this grade at the moment. It is reported that buyers have withdrawn to the side-line, causing a significant slow down in the purchasing activities.

A woven bag manufacturer from Linyi said, “We are hearing market talks that domestic supply might surge next month as futures contracts for September delivery end might push materials to spot market. We prefer to be cautious, and hence we only purchase material on weekly basis. Demand for our end product is stable at the moment.”

In the import market, a major Saudi Arabia producer announced official homo-PP prices to China at $40/ton reduction from late July to reach $970/ton CFR China, LC 30 days term. Market participants believed that suppliers might not face any major obstruction in attracting buyers at this levels, with a source informed, “Customers have shown great interest in these cargoes party due to a small quantity our principal has. Besides, local material is becoming more expensive now, hence import material at the lower end of the overall price range are highly preferred.”

The import PE market has been high volatile as sellers are taking measures to be clear on the buyer’s acceptance levels. Indeed, Taiwanese producer cuts their HDPE prices to the country in the earlier part of the trading day, decided to raise offers again afterward due to good sales achieved. Meanwhile, a trader claim to have sold 2000 tons of Iranian HDPE film at $1135-1145/ton CFR China, LC AS term commented, “There are more cargoes arriving by end of this month and we are really concern about the near term outlook. Especially when the futures market is high volatile and upstream costs are softening.”  

In Southeast Asia, there is no abrupt movement on the last trading day of the week, though buyers adopted a more cautious stance after seeing some indications of improved import homo-PP supply in Vietnam market. Players are speculating that slower demand in other international ground have encouraged sellers to divert more cargoes to Asia market, where better margins can be obtained. An international distributor for Saudi Arabia homo-PP informed, “Our principal assigned another 1000 tons of cargoes to Vietnam today and we managed to sell just well at the level of $1000/ton, CIF, LC AS term. Both import and domestic markets have been alleviated from supply tightness, and for this we are concern about the outlook in the near term.” Many Vietnamese buyers are felling the pinch of slower demand condition in Turkey market, caused by the country’s own political turmoil. The thoughts that sellers could temporarily avoid selling to the world’s second largest petrochemical importer are lingering in people’s mind, which discouraged large volume intake.

The Indonesia market is sharing the same situation despite many converters are still holding low inventories levels. “Buyers just simply wait and hold tight on the expectation that price is still on the way south,” a trader commented. The source added that firming propylene costs, however would limit the extent of any possible price reduction in the coming days. A converter reiterated, “We plan to hold our purchases for a week longer with hope to obtain dutiable cargoes at below $1000/ton threshold. Demand for our end product is regular.”

The regional HDPE film market remains under downward pressure due to persistent high supply level despite some production issues at one of Malaysia’s PE plants. An Indonesian trader informed, “Our Malaysian supplier has restarted their plant following some technical glitches and our allocation has been reduced. Yet, we are still looking at soft side given weak demand condition.” International traders are also complaining about difficulties they face in concluding deals for HDPE film cargoes, in which several have decided to offer special deals to freshen cash flow.

The general market perception is that LLDPE film supply tightness could support in holding its premium over other PE film grades, yet buyers are also looking at a possibility of a spillover effect from weakening ethylene costs and HDPE film prices.

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