Asia Daily PP and PE Overview 15 August 2016

In China, futures prices on Dalian Commodity Exchange extended the firming trend from last week, adding CNY114/ton ($17/ton) for PP and CNY70/ton ($11/ton) for LLDPE. January delivery contract settled at CNY7511/ton ($965/ton without VAT) and CNY8970/ton ($1153/ton without VAT) respectively.

Domestic spot market sees little movement, as price lists for both PP and PE remain mostly stable from the previous trading session. However, it is reported that sales is satisfactory though buyers split their purchases to smaller quantity to avoid any abrupt changes. A trader in Beijing informed, “Our customers continue to make replenishment today as market confidence is preserved by strong futures trading. We think if G20 Summit could have any impact on the market, symptoms would show this week as plants start adjusting their production rate in accordance with government guidelines. We plan to wait to see clearer market direction before taking our position.”

In the import market, there are very limited numbers of new PP offers, though prices at the lower end of the overall price rage are mostly recorded a small gain of $10-15/ton compared to last week. A trader offer Indian homo-PP at $970/ton CFR China informed, “Buyers appear to have smaller interest for import cargoes today and they place bids at below the $950/ton threshold now. We are not in rush to accept such low price levels, even knowing that near to medium term outlook is full of uncertainties.”

Players are expecting to see better demand for PE than PP in the near term given the peak season for agriculture film and flexible packaging is around the corner, not to mention LLDPE film supply is relatively tighter. In addition, import LDPE film sector might also face a new challenge as traders reported seeing good buying interest for local coal based LDPE film due to prices of approximate $45/ton lower.       

In Southeast Asia, regional PP players are caught with surprise when Saudi’s homo-PP unexpectedly breached below the $1000/ton threshold in Vietnam just when market starts seeing some signs of stabilisation as sellers claimed healthy sales last week. Import homo-PP prices from Middle East to Vietnam below the $1000/ton mark were last seen during mid-June 2016. A buyer purchased 100 tons of homo-PP yarn and injection at $980/ton CIF Vietnam, LC AS term said, “Domestic market is weak at the moment and it seems that supply from both local and international suppliers are increasing. We only purchased a small quantity as outlook remains cloudy, which might indicates high risk.” Some players speculated that weaker demand in world’s second largest petrochemical importer – Turkey due to political turmoil might have pushed international suppliers to find an immediate new outlets for en-route cargoes. For this, lower prices might just be a knee-jerk reaction, however, this remains an assumption.

Meanwhile, non-dutiable homo-PP offers to Indonesia have also weakened by $10-20/ton compared to last week since buyers conserved a very strong wait and see stance despite having low inventories. A buyers purchased Vietnamese homo-PP injection at $1080/ton CIF Indonesia, LC AS term informed, “Demand for our end product is regular at the moment, yet we still prefer to buy in small quantity as we believed that market still has room to move lower, though the window might be just small.” Other buyers in the country have also expressed their concern over such sporadic drop observed in Vietnam, which send even more pressure down to the sentiment.

The regional PE market received limited number of new offers on the first trading day of the week, mostly at stable to firmer levels. Ethylene cost based on CFR Northeast Asia term surged $40/ton last Friday while CFR Southeast Asia value added a moderate gain of $15/ton, which might keep the current down trend in the downstream PE market in check. A major Thailand maker lifted HDPE film prices to Vietnam by $45/ton and HDPE blow molding by $30/ton compared to last week said, “We managed to close a good number of order at the previous prices, hence we decided to lift our offers with the support of higher upstream cost. Our customers have yet to give their feedback on the new offer levels; hence we prefer to monitor market movement further before implementing any adjustment.”

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