Asia Daily PP and PE Overview 19 Aug 2016

In China, futures market concluded the week on the firmer note. January delivery contract settled CNY73/ton ($11/ton) higher for PP touching CNY7567/ton ($973/ton without VAT). The same contract for LLDPE futures closed at CNY9025/ton ($1160/ton without VAT), some CNY50/ton ($8/ton) higher than yesterday.

Domestic spot offers for both PP and PE remain unchanged compared to the previous trading session, except LLDPE film added CNY50-150/ton ($8-23/ton). Purchasing activities are reported to be satisfactory, especially for homo-PP yarn in local market. A packaging converter in Zhejiang informed, “Demand for our end products has picked up this week and we think more order would come before the Mid-Autumn festival. We have been keeping low stock on hand for some time and we need to replenish soon. There are too many rumors and murmurs about a possible surge in supply next month, hence we are not confident in building stock.”

In the import market, homo-PP prices see little changes compared to yesterday and deals concluded continue to stand at the lower end of the overall prices range. A trader sold Indian homo-PP at $950/ton CFR China, LC 90 days term informed, “We have left a small quantity to offer to regular converter customers. Some of our buyers need to shut their plant for two weeks during the G20 Summit, and for that they refrain from making purchases. Our hope is that demand would pick up in September once our customer resume operation.”

Players in the PE market reported demand for HDPE film in the country is now better than last month, however, prices above the $1150/ton threshold are facing strong resistance. A trader in Dalian claimed to have 2600 tons of Brazilian HDPE and LLDPE film cargoes to arrive by early September 2016. The source said, “Agricultural film makers start to replenish material and we hope this could support the market sentiment in the coming month. Our UAE supplier might announce fresh prices next week, initial indication is that prices might remain firm.”

In Southeast Asia, sentiment appears to be stronger on the last trading day of the week as upstream costs skyrocketed on Thursday boost buying interest. Players are generally expected no further reduction on import homo-PP prices to the region in the near term, from which many buyers decided to take position today. Indeed, it is reported that Indonesian buyers have portrayed a strong buying appetite after received Singaporean homo-PP offers at $1080/ton CIF, LC AS term. While some stick to negotiation for lower prices, many have concluded deals after $10/ton discount. A buyers placed bid at $1050/ton for this origin informed, “We would buy in large quantity if our supplier accept the bid. We think the bottom is near, hence we plan not to wait for too long before taking position.”

Meanwhile, Indian major has also sold out available allocation to Vietnam after committed to $20-30/ton discount from last week. A distributor sold 600 tons of cargoes at $990/ton, CIF Vietnam, LC AS term today said, “We concluded deals without any further reduction thanks to strong energy and monomers market. Outlook is positive in the near term.” Even domestic market in Vietnam has also gained momentum with traders sold locally held cargoes at the price levels that he couldn’t achieve in the past few days. Source informed, “We have sold out as well. Our next cargoes would only arrive by mid-September, therefore chances that local sellers might attempt to increase domestic offers in the coming week.”

The regional PE market sees limited number of new offers, however, firmer ethylene costs have nurtured market expectation for a stable to firmer outlook for the coming month. Several converters in the packaging sectors reported about a slight pick up in end product orders, which might positively influence the resin market. A trader reported, “We received offers for Middle Eastern HDPE film at $1100/ton FCA Vietnam, LC AS term for 1000 tons quantity. We think it is too risky to hold high HDPE film stock at the moment, hence we prefer to concentrate on other grades. Domestic ground have shown some improvement today, and we hope to see better condition next week.”

Indonesian PE market has also shown some signs of pick up in demand, though most deals are in small quantity. Stronger ethylene cost has put a major local producer to a position that they might need to cut operation rate to protect margins. However, there is no final conclusion on the exact schedule at the moment.

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