Asia Daily PP and PE Overview 30 Sept 2016

In China, futures prices on Dalian Commodity Exchange ended the final trading day of the month on stable to firmer notes. Contract 1701 for PP closed at CNY7309/ton ($937/ton without VAT), only CNY9/ton ($1/ton) higher than the previous day. LLDPE futures added CNY40/ton ($6/ton) to reach CNY8800/ton ($1128/ton without VAT).

Domestic spot offers for both PP and PE increased CNY50-100/ton ($8-15/ton), however, market is muted by the second half of the trading day as many players leave for the long National Day holidays. Players are looking at stable trend for the post holiday term as total inventories at major domestic producer’s warehouses have reduced significantly this week. A trader said, “Our customers have replenished sufficient material, hence we could not close any deal today. We are not confident about the market prospect in the second half of October due to expected surge in inventories.”

In Southeast Asia, the market turned quiet on the final trading day of the week with very limited number of new offers observed. Buyers reported that many international suppliers have hold back on their cargoes and would only re-open offers in the coming week. Stronger energy market seems to have stimulated the sentiment in Vietnam more than other neighboring markets, and in fact, domestic traders here are attempting to lift domestic offers for both PP and PE cargoes by VND200,000/ton ($9/ton) compared to yesterday. A trader, who decided to hold back their cargoes after received better number of purchase inquiries said, “We hope to sell at higher prices in the coming week as for now, we are bearing loses. Outlook is really cloudy and supply would continue to improve in the coming month.”

Domestic market in Vietnam has been following the weakening trend over the past two weeks and players remain hopeful of better demand condition in the near term due to the traditional high demand season.

Meanwhile, trading activities in Indonesia remain subdued as many players are on agenda to deal with the tax amnesty issues. However, demand is expected to improve in the near term, in line with the recovering of the overall financial situation. In addition, buyers are bearing in mind the strengthening Indonesian rupiah, from which it could be cheaper for buyers to purchase later than now. A converter bought Southeast Asian homo-PP at $1070/ton CIF Indonesia, LC AS term said, “We only procure a small quantity. Local currency is appreciating and we prefer to wait before taking quantity.”

On the other hand, falling ethylene costs send shivers down the PE market, and despite firmer energy values, buyers show no confident in making purchases. A Middle Eastern producer commented, “Market is really quiet this week and only customers from stretch film industry are aggressive in making purchases. Our LDPE plant has resumed operation after some technical glitches previously and currently operating at full capacity. We are really not confident about the market outlook in quarter 4 as it seems the overall supply is increasing.”

Ethylene costs based on CFR Northeast Asia fell $55/ton on Thursday, surprising many market players since several major regional crackers are still offline. This condition might persist in the near term due to the absence of Chinese buyers during the National Day holidays from 1-7 October 2016.

Several regional converters, specializing in HDPE shopping bags informed that they have yet to received Christmas orders from overseas buyers. However, some expect the orders to come by early October, which is later than usual.