Asia Daily PP and PE Overview 22 Aug 2016

In China, futures prices on Dalian Commodity Exchange surprisingly turned lower on the first day of the week, settling at CNY7468/ton ($956/ton without VAT) for PP, CNY85/ton ($13/ton) lower than last Friday. LLDPE contract for January delivery slashed CNY100/ton ($15/ton) to close at CNY8915/ton ($1141/ton without VAT).

Domestic spot PP and PE offers are steadfast despite weaker futures market, as price lists see little changes from the previous trading session. Players attributed this to the fact that local sellers are lacking of inventories pressure toward the end of the month, while deals for PP, LLDPE and LDPE in domestic ground are reported to be satisfactory.

A trader from Hebei informed, “We are quite happy with sales result for spot PP cargoes as well as coal based auction result today. Most of our customers are not holding high inventories and buyers in eastern China are ramping up their purchases before the G20 Summit road ban take effective this Friday. This might help in holding local market on the stable to firm trend in the near term.”

Discussing about festive orders, players reported seeing no drastic pick up in end product business though the mid-Autumn festival is traditionally regarded as simulative factor for food packaging sector. A trader based in Ningbo said, “We visited some of our customers recently and its seems that they have prepared earlier for the upcoming mid-Autumn festival orders. Most of them are holding about two weeks worth of end product inventories and a week worth of raw material, means they would need to replenish cargoes continuously.”

There are very limited numbers of new offers in the import market today, however it is reported that demand for import cargoes is a bit weaker than local material due to the promptness. However, players are generally expecting firmer offer levels from international suppliers with the support from stronger monomer costs and energy values.

In Southeast Asia, there is very limited number of new offers observed on the first trading day of the week; however prices are getting back on the stable to firmer track with the support from strong upstream costs. The trend is notably seen in Vietnam market, where a trader lifted homo-PP prices by $10/ton for Indian material and by $25-35/ton for Saudi Arabia cargoes compared to official price list last week. Source from the trader informed, “We managed to conclude some deals for Saudi cargoes at $1015/ton CIF term to manufacturing customers. We think that market might continue to firm up in the near term considering the current costs.” Locally produced material also gain ground in Vietnam, with a major distributor lifted offers by VND500,000/ton ($22/ton) from last week. Despite domestic buying interest remains subdued; players are generally expecting a better demand condition after the National Day holidays early September given firm upstream values and the start of traditional high demand season.

Meanwhile, sentiment is also warming up in Indonesia as buyers take position to maintain inventory levels. After some $20/ton reduction from a major local producer for homo-PP cargoes, traders tend to hold firm on their prices in spite of lower bid from the buyer’s side. A trader said, “We refused to give additional discount and we managed to conclude deal. Buyers expect that the market has reached the bottom, hence they decided to buy instead of waiting any further.” Even trading activities in the import market appear to improve, though most deals are reported at the lower end of the overall prices range.

The regional PE market is awaiting September delivery price announcements, however, couple of regional makers are looking to increase their offers, in line with higher ethylene costs. A Malaysian producer offer LDPE film cargoes informed, “We are planning to increase our offers to regional market due to higher costs. However, the extent of increment might be limited as demand is not supportive. The mid-Autumn festival is just around the corner, yet many converters in the food packaging sector see mediocre demand for their end product.”

On the other hand, HDPE market continues to trail behind other PE film grades, and in fact, prices at the upper end of the overall price range face serious difficulties in attracting buying interest. For this, several suppliers have decided to step back on their prices to speed up sales process. This condition is expected to prolong in the near term as comfortable supply hurdle HDPE market from moving higher.

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