Asia Daily PP and PE Overview 25 Aug 2016

In China, futures market weakens today as January delivery contract for PP dropped CNY112/ton ($17/ton) compared to yesterday while LLDPE contract decreased CNY85/ton ($13/ton). Both PP and LLDPE futures settled at CNY7497/ton ($962/ton without VAT) and CNY9080/ton ($1165/ton without VAT) respectively.

Domestic spot market continue to add CNY50/ton ($8/ton) on both PP and PE cargoes, though trading activities are slower as most buyers in the eastern China area are taking off ahead of the G20 Summit. In fact, some 17 BOPP film converters around the Hangzhou area are demanded to shutdown for 14 days from 25 August to 7 September 2016. As a result, many buyers have suspended replenishment activities this week to avoid inventories risk. At the moment, it is expected that PP buying activities in east China might be quieter during the Summit period. Risk is high, however, market is holding on hope that there would be a round of replenishment by second week of September.

At the meantime, the number of deals reported in the import market appears to be healthy at stable to firm price levels. A buyer purchased 200 tons of Singaporean homo-PP yarn at $1010/ton CFR China, LC AS term commented, “We think this price is rather competitive, hence we proceed with purchases after obtain $10/ton discount. Most dutiable cargoes are unable to break above the $1000/ton threshold even with the support of strong monomer costs. We think market would sustain the stable trend in the near term and we just concern about the inventories built up after the G20 break.”

In the PE market, HDPE yarn continues to enjoy healthy demand aside LLDPE film and LDPE film due to tighter supply for these grades. A trader said, “With the upcoming agriculture film season, we expect a positive outlook especially for LLDPE film and LDPE film.”

In Southeast Asia, more producers announced fresh prices to the region today mostly at softer levels compared to last month. It appears that stronger upstream costs have yet to generate any significant support for the downstream markets and that sellers might need to wait for better demand condition before higher prices can be achieved. A major Southeast Asian producer opened September delivery offers to regional buyers with reduction of $30/ton for LDPE cargoes and $20-30/ton for homo-PP. A distributor informed, “Malaysia market is rather weak at the moment and some of our customers refused to replenish material amid slow end product business. Sentiment here is bearish, however we hope to see better demand in the near term.”

In Vietnam, many have concluded deals for Saudi LLDPE film cargoes at larger than usual discount from initial offers. At the meantime, a sense of caution blankets the domestic ground. A buyer said, “We heard several other buyers are requesting for additional LLDPE film cargoes, however, we decided not to procure any quantity this month. We are still having couple of previous shipments being delayed. Local market is rather weak and we are selling at loses now. We plan to hold the remaining cargoes till after the National Day holidays with hope to see a pick up in demand.” Several traders are also complaining about the difficulties they face in attracting buying interest despite supply for LLDPE film remains tight across the region.

In the PP sector, there are market talks that a major Singaporean maker might have a more regular allocation for homo-PP yarn grade to the market in the near term as part of the positioning strategy. There are very few new offers for dutiable origins cargoes today and buyers again slow down to look for more supportive factors before proceeding with purchases. A Vietnamese buyer informed, “In spite of some Saudi homo-PP cargoes concluded at below $1000/ton threshold yesterday, our supplier refuse to negotiate on their cargoes claiming lack of quantity and firm monomers costs. We are a bit concern over the November outlook as most cargoes purchased since last week would arrive at the same time. We need to consider really carefully before accepting the price at $1000/ton CIF Vietnam term.”

The homo-PP yarn sector in Indonesia continues to be under pressure due to more comfortable supply compared to injection and film grade, players said. Buyers have yet to give up on negotiation for further discounts, knowing that propylene costs have reached the highest level in a year.

In the production news, players reported that Shell has cut operation rate at its Singapore naphtha cracker to only 80% due to some unexpected technical woes at one of the furnaces. It is uncertain on how serious is the issue and how long would it take for the company to normalise the run rate. However, allocation for propylene and ethylene to downstream buyers have been impacted, sources said.

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