Asia Daily PP and PE Overview 13 Oct 2016

In China, futures prices on Dalian Commodity Exchange reverted the firming trend recorded in the past three sessions to settle lower today. PP contract edged down CNY116/ton ($17/ton) to reach CNY7527/ton ($956/ton without VAT) while LLDPE contract decreased slightly of CNY10/ton ($1/ton) to close at CNY9265/ton ($1177/ton without VAT).

In domestic spot market, only LDPE film prices continue to add CNY50-100/ton ($8-15/ton) from yesterday, others grades including PP, LLDPE and HDPE have slashed CNY50-100/ton ($8-15/ton). Purchasing activities are reported to be weaker significantly today partially due to softened futures trade. “In addition, most of our customers have replenished sufficient material. We think market might remain on the stable track in days ahead given tightening overseas supply. We are monitoring the start up of new coal based plant to gauge the impact on the market.”

Meanwhile, it is reported that most greenhouse film makers based in Northern China are operating at near to full rate amid peak season. Yet, inventories on hand are only for 7-10 days. A converter informed, “We are able to accept local coal based LLDPE and LDPE film and therefore we have reduced our dependency on import material. We might need to maintain the current operating rate until end of November as end product orders just started to come in.”

In the import market, Sadara’s on-spec cargoes are now available in the open market, though the quantity is small, sources said. Many traders are complaining about visible weaker demand condition and fear of possibility of decreasing trend, especially when ethylene costs have also inched lower. A trader commented, “We feel grateful that we have depleted most of our cargoes yesterday at thinner margins. We receive no bid from regular customers today and we expect this condition to sustain in the remaining of the week. Window of opportunity for re-exporting is very tiny, hence we decided to monitor further development before taking position.”

In Southeast Asia market, demand is reported to remain slow though some interesting development observed toward the end of the week. There are several offers for LLDPE film from various origins to be re-exported from China to Vietnam, which raises questions among players. Despite better than expected post-holidays demand in China that pushes import offers to the country higher; in Vietnam, import LLDPE film at $1200/ton mark and above are facing stiff resistance. Re-export cargoes are offered way above market acceptance levels, sources said. An international trader offered direct cargoes from Saudi Arabia at $1185-1190/ton CIF Vietnam, LC AS term informed, “We stepped back on our offers by $10-15/ton compared to yesterday due to disappointed market respond. It seems that Southeast Asia market is facing major difficulty to move up, hence we plan to just deplete available cargoes on hand.”

The HDPE market is still trailing behind other grades amid persistent weak demand. Major suppliers have attempted to maintain their prices on the stable to firmer track, yet offers at the upper end of the overall price range attracted very limited attention. In domestic Indonesia, most HDPE film cargoes are concluded with discount this week. A source reported, “Our customers are complaining about slow end product business and very reluctant to build up stock. We are not confident about the near term outlook for HDPE.”

Regional PP market receive very limited number of new offers for PP this week, however many players have expressed positive expectation for the near term prospect. An international trader commented, “We think PP prices should increase as supply might tighten due to the scheduled shutdown at Indonesia’s Chandra Asri, India’s Reliance and Saudi’s PetroRabigh in November.”

Major local traders in Vietnam have been attempting to implement the second price increment on homo-PP cargoes this week; however, market might need more time to accept. A local trader in the country informed, “The pace of price increase in the local market might be slow but we are confident about the outlook for the remaining of October considering such firm stance in the nearby China market.”