Asia Daily PP and PE Overview 02 Sept 2016

In China, futures prices on Dalian Commodity Exchange marks fifth loosing session in a row on the last trading day of the week. January delivery contract for PP settled down CNY80/ton ($12/ton) from yesterday to reach CNY7170/ton ($917/ton without VAT). LLDPE futures trike a minor loss of CNY15/ton ($2/ton) to close at CNY8730/ton ($1117/ton without VAT).

Domestic spot market in China remains mostly stable after a week of falling futures prices; however, sentiment is badly affected. Most traders claimed having very slow sales this week as buyers take extra cautious stance amid weakening energy value and plunging futures trades. A trader in Ningbo commented, “As buyers return from G20 shutdown, we believed that restocking activities would prevent the market from sliding rapidly; especially when many import cargoes are being delayed due to Hanjin issues. Yet, looking at longer term, we expect increased in supply by quarter 4.”

Indeed, Zhongtian Hechuang Co Ltd has scheduled the first trial run at its 700,000 tons/year coal-based PP unit this month, and on-spec cargoes shall be available by October. Meanwhile, Shenhua XinJiang Coal-Based New Materials Project is planning to bring its new CTO plant on stream this November. The plant consists of a 450,000 tons/year coal-based PP unit and a 270,000 tons/year coal-based PE unit.

Import homo-PP to China has not witnessed any abrupt movement with offers below the $970/ton marks becomes limited. Softer local market on the other hand has had buyers very reluctant with import material recently. Meanwhile many PE traders are in mid of re-arranging shipments after Hanjin Shipping Co filed for financial receivership. One of the sources informed, “We have some UAE PE cargoes shipped to China using Hanjin and currently pending for custom clearance. At the meantime, some of our other cargoes have stopped by Malaysia port to switch carriers as we fear Shanghai and Xiamen port authorities are no longer allow disembarkation of Hanjin ships. This might cause some delays, yet we are unable to determine the duration at the moment.”

In Southeast Asia, market sentiment is rather quiet on the last trading day of the week as Malaysian buyers just return from the National day holiday, while Vietnamese buyers are off for their own National celebration. There are very limited numbers of new offers observed in the import market, though many have expressed their expectation for firmer offer levels in the coming weeks. An international trader informed, “We have sold out our September allocation for both PP and PE by now. With the current market condition, we think most PP sellers would attempt moderate hike in the near term, although buyers are resisting higher prices. The Hanjin Shipping Co. incidence has yet to show clear impact on the market, however, we think some cargoes delayed would be inevitable.”

There are active market talks that import duties for homo-PP to Vietnam would be lifted to 3% by January 2017, however, no confirmation from respective authorities at the moment. If this were confirmed, it would create a wave of frenzy buying amongst Vietnamese buyers as customers here might wan to avoid higher import duties. Currently, import duties for homo-PP to Vietnam stand at 1%.

Demand for homo-PP injection in Indonesia remains healthy and this condition, in fact, has been in place for couple of weeks. Today many sellers still claim to have better sales for this grade compared to homo-PP yarn. A woven bag maker informed, “September is normally slow season for our end product, therefore we prefer not to keep too high inventories. We might wait for a while longer before making fresh replenishment.”

The regional PE market is also calm, as most sellers are not offering toward the end of the week. There are some discussions about possible lack of LDPE film supply due to plant shutdown and strong demand in China would attract seller’s attention. A regional producer informed, “Besides, we do expect healthier demand for LDPE film in Southeast Asia market in September, as buyers prepare for the holidays season. Therefore, we are holding very firm on our prices.”

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