Asia Daily PP and PE Overview 26 Aug 2016

In China, futures contract 1701 for PP continue to move lower on the last trading session this week, closing at CNY7440/ton ($953/ton without VAT), down CNY49/ton ($7/ton) from yesterday. Meanwhile, LLDPE futures fro January delivery inched up CNY65/ton ($10/ton) to settled at CNY9110/ton ($1167/ton without VAT).

Domestic suppliers offered some CNY50/ton ($8/ton) discount on spot PP cargoes today due to the absence of buyers in eastern China ahead of G20 Summit. However, demand for LLDPE and LDPE film remains relative strong in northern area, which encourages sellers to implement CNY150/ton ($22/ton) hike on LDPE film cargoes. It is reported that purchasing activities remain resilient event after the price increment as limited availability left agricultural film makers no choice since high seasonal demand is just around the corner. Indeed, private data showed that total PP and PE inventories at major local maker’s warehouses have reduced by approximate 12.5% since beginning of the week. Lacking of inventories pressure might support a stable to firmer trend in local market in the near term.

There are little changes in the import PP market, though Brazilian homo-PP emerges at $960/ton CFR China, LC AS term. The supplier informed, “It seems that PP market might be quieter in the coming days as major converters in the PP concentrated areas of Hangzhou have left for the G20 Summit shutdown. However, with the strong upstream costs, we are not expecting any drastic price cut in the near term. In contrast, we expect to see better market condition in September.”

Ethylene costs based on CFR Northeast Asia term has reached four months high on Thursday, touching the $1200/ton mark on tight supply stemming from a series of cracker overhaul. Non-integrated producers in the region might find it difficult to maintain positive profit margins, as downstream PE market has yet to inherit any support from surging upstream costs. On the average point, import LLDPE film to China this week stand near to $1180/ton, LDPE film at $1160/ton and HDPE film at $1125/ton, which is well below the ethylene costs at the moment. Outlook for the coming is rather positive, yet it is uncertain if PE prices could firm up enough to cover the current costs.

In Southeast Asia, market is calmer on the last trading day of the week, especially in the PP sector as most buyers have concluded their purchases earlier this week, while others are holding firm on their buy ideas. Import homo-PP from Middle Eastern at below $1000/ton threshold is becoming scarce; yet not completely disappear from the market. In fact, Indonesian buyers reported receiving new offers from a Saudi Arabia maker at $980/ton CIF Indonesia, LC AS term. A converter informed, “We placed bid at $950/ton with the same term and currently waiting for our supplier’s feedback. We aware of the current increase in upstream costs, however we hope to received some discounts on deals as demand is not significantly picking up.”

Several international traders have expressed their intention to divert some irregular origins homo-PP cargoes to the region with hopes to achieve better profit margins. A market source informed, “We have some Brazilian homo-PP cargoes and currently collecting bid from buyers. So far, buy ideas for these cargoes are little low, however, we hope demand would pick up in the coming weeks.”

In the PE market, another major Saudi Arabia producer has announced September delivery cargoes today at $40-50/ton lower compared to last month for HDPE film, while the maker decided to rollover their LLDPE film offers at $1240-1250/ton CIF SEA, LC AS term. Several buyers in the region have responded saying they really need to consider the purchase carefully as the new prices are a little above market levels. A Vietnamese buyer said, “There might be some discounts available on deals, yet we might still face loses when resell in local market as buyers here are resisting strongly to any attempt to lift prices.”  

Malaysian buyers meanwhile are waiting for new offers from a major local producer. Some have expressed expectation for small reduction with a source stated, “With the current upstream costs, we are not expecting to see any large discount. Demand for our end production is very slow, hence we might only source on need basis.”

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