Asia Daily PP and PE Overview 14 Oct 2016

In China, futures prices on Dalian Commodity Exchange become more stable on the last trading day of the week with PP contract only reduce CNY46/ton ($7/ton) while LLDPE contract gained CNY50/ton ($7/ton) compared to yesterday. Both contracts settled at CNY7518/ton ($955/ton without VAT) and CNY9285/ton ($1179/ton without VAT) respectively.

Official spot offers for both PP and PE from major producer are down CNY50/ton ($8/ton) from yesterday, however, distribution market in the Southern China area witness an increase of CNY50-100/ton ($8-15/ton) on PP cargoes in the absence of sales pressure. At the other end, purchasing activities have diminished significantly as buyers withdraw to the side-line to monitor further development after futures trade turn softer.

A converter in Fujian informed, “We have purchased sufficient material for the next 10 days, hence we decided to suspend replenishment temporary. We think market is near to the peak and further increment would attract very limited buying interest.” Traders on the other hand, feeling more optimistic about the near term outlook as buyers would need to replenish material again in the coming week. The only pinching factor is the start up of the two new coal based plants since late September 2016.

In the import market, it is reported that Sadara’s LLDPE C4 film prime cargoes are now available in the spot market, sources said. A trader purchased 600 tons of the cargoes at $1150/ton CFR China, LC AS term for November shipment informed, “Our supplier is planning more regular allocation for China in the near term, mostly LLDPE film and HDPE injection. At the moment, demand in local market has weakened and we are offering some discounts to entice buying.”  

Suppliers also reported achieving better number of deal on non-film HDPE cargoes to China this week, resulted from the preparation converter embrace for the year-end season. In another note, LDPE film market seems loosing steam and most deals are concluded with discount today.

In Southeast Asia, sentiment across the region appears to be firmer despite challenges facing suppliers in lifting their offers still remain in place. Most traders have expressed their intention not to give any further discounts, especially on homo-PP considering the possibility of tightened supply stemming from several major shutdowns in November. An Indonesian trader informed, “We have not been able to increase our domestic offers lately due to weak demand, however, we believed that firmer market trend is inevitable amid PP plants overhaul.” Players in the country also reported that homo-PP offers at below the $1100/ton based on FD Indonesia, cash term for end of November delivery are now becoming very scarce.

In Vietnam, after couple of major domestic traders attempted to increase their homo-PP offers in the previous trading sessions, market sees almost no changes on the final trading day of the week. Traders hold very strong hope for brighter prospect in the near term. A market source informed, “We managed to conclude regular number of deals these few days, but mostly at the lower end of the overall price range. We think market would follow the stable to firmer trend in the coming week, hence planning no discount for now.”

The regional PE market continues to face downward pressure, especially offers at the upper end of the range. There is a minor reduction of $5/ton reported on import LLDPE film from a major Saudi Arabia producer compared to yesterday with a buyer commented, “The maker’s price is down to $1180/ton CIF Vietnam today and we tried to bid for another $10-20/ton discount on deal. It is very less likely that our supplier would accept the bid, however, we are not confident in replenishing cargoes at such high prices.” Buyers appear to be in dilemma whether to accept the cargoes due to uncertain market outlook.

Meanwhile, buyers in Malaysia are discussing about a potential price hike in the coming week for locally produced material, pointing to the weakening ringgit recently. A buyer explained, “Domestic suppliers have increased their offers by MYR50/ton ($12/ton) this week for the same reason. In contrast, we expect to see some discount from the import market for both LLDPE and HDPE film. Our end product demand is very weak.”