Asia Daily PP and PE Overview 05 Sept 2016

In China, futures prices on Dalian Commodity Exchange extended the weakening trend today, marking the sixth loosing session in a row. Contract 1701 for PP edged down CNY63/ton ($9/ton) to reach CNY7140/ton ($914/ton without VAT). Same contract for LLDPE film shred CNY90/ton ($13/ton) to close at CNY8655/ton ($1107/ton without VAT).

Domestic spot LDPE film continues to increase CNY50-100/ton ($8-15/ton) with the support of limited supply. Other grades including PP are down by CNY50-100/ton ($8-15/ton) under the pressure of persistent falling futures trade.

Many companies surrounding the Hangzhou area are still off for G20 Summit, including trading houses, yet market is blanketed with bullish expectation, as most buyers did not keep high inventories before the shutdown. An electronic devices packaging manufacturer informed, “Demand for our end product is still slow, therefore we plan to buy hand to mouth basis for the remaining of this week. We would like to source in larger quantity before the mid-Autumn festival.”

Softer local market is distracting buyers from import ground and offers for both PP and PE from international supplier sees little changes. What worth to be highlighted is that US suppliers are inviting buyers to place bid for HDPE cargoes to be delivered in quarter 4, sources said. A trader in Chongqing commented, “US suppliers might be testing market respond at the moment. More cargoes from this origin normal arrive in the final quarter of the year, as suppliers here need to deplete inventories to avoid taxes. Therefore, we are not feeling so optimistic about the medium term outlook.”

In Southeast Asia, sentiment is rather calm on the first trading day of the week with limited number of new offers observed. Regional buyers seem not very active in searching for cargoes today, yet many believed that trading activities would improve in the immediate term. In Vietnam, the government decided to lift import duties on homo-PP to 3% starting 1 Jan 2017 from the 1% currently. Players are discussing about the possible impact on the near term outlook with most pointing to a possible kneejerk respond in purchasing activities since buyers might want cargoes arrive before the implementation of new duties rate. A market source here said, “Most sellers are now holding on to their cargoes with hope that buyers would start searching for material soon. We have yet to receive any new offers as of today and we expect a more of stable to firm trend in the near term.”

Meanwhile in Indonesia, PT Polytama Propindo unexpectedly shutdown its PP plant in Balongan last Friday, 2 September 2016 due to power outages. The company might be able to restart as of tomorrow, sources said. A trader informed, “Buyers are not very active today, however, major traders are very firm on their prices. Even with the shutdown, we think prices are very difficult to increase significantly due lack of support from the demand side. We are monitoring further development before making decision.”

In the PE market, ethylene costs appears to loose steam after streak multi-months high in the previous week. Industry sources commented that further price increment in ethylene prices might be capped since naphtha supply is ample while most ethylene derivatives plants are operating at squeezed margins. Very few supplier announced import offers to the region at unchanged level compared to last week.

In domestic Malaysia market, a major producer lifted LDPE and LLDPE film prices by MYR50/ton ($12/ton) and HDPE by MYR100/ton ($25/ton) compared to last week due to weakening local currency. Responding to higher prices, a buyer said, “We think the supplier might hold firm on the their prices as they need to prepare stocks for the shutdown in December. We have purchased some quantity last week, hence we are not in rush to restock additional quantity.”