Asia Daily PP and PE Overview 09 Sept 2016

In China, futures prices on Dalian Commodity Exchange ended the week on mixed result. LLDPE contract continue to advance, adding another CNY40/ton ($6/ton) from yesterday to reach CNY8980/ton ($1151/ton without VAT). Meanwhile, PP contract slashed CNY101/ton ($15/ton) to close at CNY7215/ton ($925/ton without VAT).

Continuous weakening futures market encouraged local producers to cut spot PP offers by CNY100/ton ($15/ton) while lifting LDPE film prices by CNY50-100/ton ($8-15/ton). It is reported that converters continue to make purchases after obtain some discounts, for this total PP and PE inventories at major producers’ warehouses have fallen by nearly 13% from the earlier week, private data showed. A trader in Sichuan said, “Our customers refused to keep high inventories despite stable operation rate. Next week would be a short trading week due to the mid-Autumn festival. Pre-National Day holidays purchases are still uncertain, yet we are hoping for the best.”

There are very limited numbers of new PP offers observed in the import market, though softer domestic ground are putting pressure on import cargoes. On the other hand, players reported that LDPE film supply tightness is still persisting. Comparatively, LLDPE film and HDPE material are more comfortable now. A Zhejiang trade offers UAE’s LLDPE film at $1080/ton, CFR China, LC AS term said, “We hold positive expectation for the second half of September as several of our regular customers have planned to ramp up operation rate to meet year end orders.” It is heard that USA suppliers are pre-marketing their HDPE film and blow molding in China recently to prepare to future shipment.    

In Southeast Asia, market witnesses little changes on the last trading day of the week though buying interest appears to be slower ahead of the holidays week. International suppliers are trying to up adjust their homo-PP offers to the region, however bumped into stiff resistance, from which discounts are given in order to close deals. An Indonesian buyer informed, “Most offers for dutiable cargoes at the upper end of the overall price range are not attracting enough buying attention. We have purchased a small quantity of Saudi Arabia material at $1000/ton CIF Indonesia, which is $20-30/ton lower than last week. Demand in local market is not very strong, yet we expect better condition in the near term.”

Improved supply has swiped away the urge to replenish cargoes amongst Vietnamese buyers. Supplier’s effort to increase their prices in line with stronger propylene costs therefore yields little result. A trader informed, “Our supplier agree to some reduction on deals, yet we have sufficient cargoes on hand, hence prefer to deplete our stock first. Competition in local market is really intense and we see the only factor that hold the market at the moment is the firm upstream costs.”

In the regional PE market, import LLDPE film offers to Vietnam this week has shown some signs of loosing steam as most suppliers find it difficult to increase prices further, some even offer discounts. Players reported seeing better supply condition, especially from Middle Eastern supplier, which evoke more cautious stance amongst buyers. A distributor sold Saudi Arabia LLDPE film cargoes at $1200/ton CIF Vietnam, LC AS term informed, “Our principal supplier is now operating at near to full rate and our monthly allocation has improved notably. The question is would this be sufficient to cover the production loses in Southeast Asia market? The peak demand season is just about to start, for this we think the PE market might sustain the stable trend throughout the coming month.”

A buyer cautiously commented, “We feel the risk is piling up as our supplier repeatedly open offers over the past couple of weeks. Local market is slow; in fact, traders are offering some discounts to encourage purchases. We prefer to monitor further movement before committing to any cargoes.”