Asia Daily PP and PE Overview 24 Aug 2016

In China, futures prices on Dalian Commodity Exchange witnessed little changes today. January delivery contract for PP inched down CNY17/ton ($3/ton) from the previous settlement to reach CNY7547/ton ($970/ton without VAT). Same contract for LLDPE grinded out increases of CNY40/ton ($6/ton) to close at CNY9060/ton ($1164/ton without VAT).

In contrast, domestic spot offers for both PP and PE added CNY50-100/ton ($8-15/ton) on the back on the futures market, yet, trading activities are reported to be slower compared to earlier this week, except that enquiries for HDPE yarn remain healthy. A converter in Fujian purchased locally produced homo-PP yarn at CNY8350/ton EXW China ($1077/t without VAT) said, “We only purchased two containers of material as our supplier hold very firm on their prices. Demand for our end product is rather stable. We have no plan to build high inventory in near term as prices are too high and we are suffering from thin profit margins. We prefer to source hand to mouth basis.”

Import homo-PP to the country is still holding its competitiveness over local material and for this, international sellers are attempting to adjust deal price to slight higher than earlier this week. A trader purchased Saudi homo-PP yarn at $990/ton CFR China, LC AS term said, “Our supplier has only a small quantity of yarn grade, hence we accepted to buy at $10/ton higher. Our customers are still sending in enquiries for homo-PP yarn, meanwhile demand for PP block copolymer is rather weak. We believed that market would follow more of stable trend in the coming days as strong upstream costs would provide some support.”

Import HDPE yarn is in the limelight as Taiwanese cargoes concluded at as high as $ $1170-1180/ton CFR China today. A major Thailand makers has also lifted their HDPE yarn offer by $10/ton to reach $1160/ton with a distributor said, “Sales are smooth even after the price increment. However, we think any further price hike would face resistance.”      

In Southeast Asia, sentiment remains firm as the week proceed and most producers, who have announced September delivery offers are trying to hold firm on their cargoes. A Saudi Arabia producer offered homo-PP to Vietnam at $1000/ton, up $30/ton from last week with limited quantity; and surprisingly the maker concluded deals at $990/ton CIF Vietnam, LC AS term even after sold most of the quantity at the offered price. A distributor commented, “Our principal supplier decided to lower the hike target, however the available quantity is rather small due to aggressive sales in the past couple of week. Customers are still accepting small purchases thanks to stronger upstream costs, though many have replenished sufficient stock for now.” Market fear that such move would cast a shadow on other seller’s effort in maintaining profit margins amid higher production costs recently. It is reported that trading activities in local Vietnam market remains mediocre, which the drop in energy values are to blame to have affect buyer’s confidence.

Meanwhile, Indonesian players reported seeing good demand for homo-PP injection and film in local market. Converters in this sector informed of a pick up in end product demand, which encouraged them to intake additional cargoes. A household products manufacturer commented, “We plan to procure more quantity this week though we are sufficiently covered for the coming month. We see an increase in the number of end product orders recently and we hope trading activities would continue to pick up in the near term.” The buyer added that the preferred source of material would still be from import market. Meanwhile, homo-PP yarn is facing slower demand in this country. In fact, buyers continue to engage in heavy negotiation with hope to achieve larger discount, knowing that upstream costs have surged to the highest levels in a year.

The regional PE market hold tight on the stable to firmer track, however, it is interesting that Vietnam once thirst for LLDPE film now appears to have found its quencher. Indeed, after a major Saudi Arabia producer announced September prices at $10/ton reduction on LLDPE film to the country, buyers, especially from southern Vietnam – where more than 70% of plastics companies located, show limited interest in replenish cargoes. A buyers explained, “Our supplier is willing to give additional $20/ton discount on deals, however we decided not to proceed further as we still have cargoes since June have yet to arrive.” Meanwhile, LLDPE film supply from other international supplier remains limited.

Ethylene costs based on CFR Northeast Asia continue to firm up due to limited supply stemming from cracker shutdown, touching $1180/ton mark, which is higher than the current PE prices traded in China. The ethylene price gap between the Northeast Asia and Southeast Asia region has also been widened recently.

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