Asia Daily PP and PE Overview 17 Aug 2016

In China, the futures market continue to move lower with January delivery contract for PP slashed CNY136/ton ($21/ton) from yesterday to settle at CNY7355/ton ($948/ton without VAT). LLDPE futures also contracted CNY 115/ton ($17/ton) to reach CNY8840/ton ($1140/ton without VAT).

Domestic producers however keep very firm stance on their PP and PE offers, lifting prices by CNY50-100/ton ($8-15/ton) for most grades, except HDPE film reduced the same amount. Players attributed such persistent upward movement to the absence of inventories pressure on the seller’s side, while buying interest is diminishing, as buyers become cautious watching the futures market.

A Ningbo based trader informed, “Our customers in Eastern China area continue to replenish cargoes before the G20 summit road ban become effective, however, most only purchase in small quantity. We do not think domestic producer would reduce their offers in the near term as supply on hand is rather low. What we concern about is the acceptance level among converters if the firming trend hold for too long.”

In the import market, homo-PP prices have seen the new lower end price level with the emergence of Brazilian cargoes at $950/ton CFR China, LC 90 days term. A trader informed, “The available quantity is about 1000 tons and the cargoes would arrive by end of September. We are considering accepting these parcels given competitive prices.” The import PE market sees a clear divider between HDPE and LLDPE film markets as tight supply and the long awaited agriculture film season is expected to boost LLDPE film demand. In contrast, players reported that HDPE film converters are mostly holding high end product inventories, which encouraged them to just source material on need basis.

In Southeast Asia, there are fewer activities observed in overall due to a holiday in Indonesia while most producers have yet to announce new prices. Meanwhile, homo-PP suppliers to Vietnam mostly claimed to have sold out their allocation for this week, spark hope that market is nearing to the bottom. A trader opened offers on behalf of a major Saudi Arabia producer at $10/ton higher than last week, reaching $1010/ton CIF Vietnam, LC AS term. A source close to the trader informed, “We have left only a small quantity, and hence we prefer not to cut prices too much despite many buyers continue to bid for lower levels. We have sold out quickly after the price announcement with $20/ton discount.” The trader’s concluded level is also indicating some $10/ton higher than yesterday for the same origin, which trigger discussion among buyers that PP market might have touched its bottom. Commenting on this, a buyer said, “Buying activities for import cargoes are not too bad as local traders are trying to balance their costs of previous high price cargoes while converters find the current levels to be attractive. We hope, together with firmer upstream values, market can be more stable in the coming days.”

The regional PE market sees little movement compared to the previous trading day and market is awaiting September delivery offers from major producers. Firmer ethylene costs are encouraging a general stable to firmer expectation, though comfortable supply continue to cast uncertainties on the HDPE film market. Meanwhile, major Southeast Asian maker cut LDPE and HDPE prices to Vietnam yesterday by $50/ton from last month is now in the process of closing sales. A trader offer on behalf on the producer informed, “We maintain very firm stance on our cargoes and managed to conclude some deals for LDPE film at $1200/ton, without any discount. We think buyers would gradually accept this price levels given strong ethylene costs and expected better demand in the coming month.”

Elsewhere in the region, the monsoon season is discouraging buying interest in India and Philippines markets, though many have expressed a more positive expectation for September outlook. A buyer in Philippines informed, “We expect demand for our end product would slowly improve in the near term as Christmas orders would come. At the moment, we are just buying on need basis.” Major local producer in India meanwhile rollover their PE offers with price protection scheme remain effective, yet traders are complaining about sluggish demand condition.

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