Asia Daily PP and PE Overview 19 Sept 2016

In China, futures prices on Dalian Commodity Exchange continue to move lower as contract 1701 for PP inched down CNY13/ton ($2/ton) to reach CNY7102/ton ($903/ton without VAT). LLDPE futures also lose CNY25/ton ($4/ton) to settle at CNY8730/ton ($1110/ton without VAT).

Domestic spot market make no escape from falling futures trades and local producers elected to cut offers by CNY50-100/ton ($8-15/ton) compared to last week for both PP and PE. Except, LDPE film added another CNY100/ton ($15/ton) on the back of limited supply. Despite the reduction, it is reported that trading activities are slow, as buyers prefer to wait and see hoping for further discount to emerge. A converter reported, “We have not been keeping high inventories on hand for sometime now due to highly volatile market prices. It is necessary for us to replenish material this week, though we prefer to monitor couple of days more before making decision. We also plan to ramp up production rate soon.”

Import PP to China remains unchanged from the previous trading session though falling local prices and weakening Chinese Yuan is deterring buyers from taking position. Meanwhile, import HDPE film to the country is facing serious demand deficiency from which several sellers have elected to cut their offers further compared to earlier this month. A trader reduced Southeast Asian HDPE film price by $10/ton to $1110/ton CFR China, LC AS term commented, “No one is asking for offers and we feel really worried about the current state of demand. Deep-seas cargoes from Brazil are getting bid well below $1100/ton threshold and this condition might worsen a mid weakening Chinese Yuan.”

In Southeast Asia, market starts a fresh week on a calm sentiment and limited number of new offers at largely stable to softer levels compared to last week. Players in Indonesia and Vietnam reported seeing little changes in domestic buying interest, though many have indicated willingness to negotiate with buyers. A PP trader in Vietnam informed, “Buyers are very reluctant to replenish material and if this condition persist, local traders might face serious pressure as supply is rather comfortable now.”

Even in Indonesia, trading activities are described as ‘cold’ despite the recent production issues at one of the major local plants that affected domestic supply to a certain extent. A buyer commented, “However, locally held imported cargoes are widely available and have offset the production loses resulted from the plant issues. We have sufficient material, hence we are not in rush to make another purchase.” A major domestic producer has rolled-over their offers from last week on the first trading day of the week.

In the import market, there are very limited numbers of new offer observed as suppliers are monitoring market development before setting fresh prices. A major Saudi Arabia maker open homo-PP offers to Vietnam at $1020/ton CIF, LC AS term, some $15/ton lower than initial offers given last week, though many expected deals to conclude at stable level. Meanwhile, another Middle Eastern producer sold homo-PP at $1000/ton with the same term with a distributor source informed, “We only have 500 tons allocation and have already sold out. We think market is nearing the peak and have little room to further increment, especially when demand is not there.”

In the PE market, despite the general tightness in LDPE film supply reported in the nearby China market, Southeast Asian buyers are not facing high difficulties in obtaining material. A regional supplier informed, “We have transferred most of our allocation to China market as demand is stronger there. We maintain our offers stable at $1230/ton CIF Vietnam and received no respond from buyers. Most of our customers complain about slow end product demand which discourage them from keep stock.”

Not only demand for LDPE film is slower than expected, HDPE film also remains under pressure. Indeed, a plastic bags converter active in exporting to Europe informed, “We only have order till end of October and there is very few Christmas orders are coming in at the moment. We have no plan to replenish material until we can secure better number of end product orders.”