Asia Daily PP and PE Overview 17 Oct 2016

In China, futures trading started the new week on the stable to firmer trend. Contract 1701 for PP edged CNY87/ton ($13/ton) higher than last Friday to settle at CNY7602/ton ($965/ton without VAT). LLDPE contract meanwhile saw only CNY$10/ton ($1/ton) lower at CNY9245/ton ($1174/ton without VAT).

There is no major movement recorded in domestic spot market as major suppliers hold their PP and PE offers unchanged amid weak buying interest. Several traders are taking arbitrage opportunities to move homo-PP cargoes from Eastern to Southern China to leverage the gap of CNY200-300/ton ($30-45/ton).

On the other hand, both Zhongtian Hechuang Co Ltd and Shenhua XinJiang Coal Based New Materials Project have successfully started up their CTO plants and are expected to achieve on spec cargoes soon. Zhongtian Hechuang Co Ltd produces 350,000 tons/year of PP and 300,000 tons/year of LLDPE, while Shenhua XinJiang is designed to make 270,000 tons/year of LDPE and 450,000 tons/year of PP. These plants come online would likely to increase domestic supply in November, players said.

In the import market, import homo-PP to China has inched up approximate $10/ton compared to last week and prices at the lower end of the overall price range are fading. A trader sold Saudi Arabia’s homo-PP yarn cargoes at $980/ton CFR China, LC AS term commented, “We plan to implement another $10/ton hike tomorrow if necessary. We don’t think the market could turn softer in days ahead given low inventoried pressure from seller’s side. November, however, appears to be bearish to us.”

Demand for PE has dropped visibly compared to last week and suppliers are complaining about the disappointed number of purchase inquiries they received on the first trading day of the week. A Zhejiang based trader offering Middle Eastern and Southeast Asian HDPE film at $1150-1170/ton CFR China level, said, “Buy ideas are well below the $1150/ton threshold despite these cargoes are arriving in 1-2 weeks time. We are holding firm stance to monitor the feedback before making further decision.”

In Southeast Asia, there are very limited numbers of new offers reported on the first trading day of the week. However, couple of suppliers have attempted to lift import homo-PP prices to the region after propylene costs surged to the highest levels in nearly 15 months last Friday. In Vietnam, a South Korean maker opened offers for homo-PP at $1030/ton, CIF Vietnam, LC AS term, a $10/ton higher than the previous week. It is interesting that the supplier only limit the offer validity to two hours and managed to conclude available quantity. A trader commented, “We remain cautious, yet this is a good sign for domestic ground at the moment. We hope this trend could sustain in the coming days.”

In Indonesia, a major Thailand producer has also announced fresh weekly offers with $10/ton hike on all PP cargoes compared last week. A converter reported to have one month worth of inventory on hand said, “There are very limited cargoes from Singapore, Thailand and Middle East recently, and this would likely to keep the PP market on the stable to firmer track in the near term. We are just not confident about the sustainability of the trend, therefore we prefer not to keep too high inventories.”

Industry experts on the other hand expect propylene costs to remain under pressure as most crackers have completed maintenance work and due to resume soon. Yet, several PP plants shutdown in November are expected to keep the market in balance.

The regional PE market is awaiting new offers from major international producers and buyers were informed that a small hike is possible. A regional buyer informed, “Our Middle Eastern supplier is planning some price increment on their LLDPE film cargoes, claiming healthy sales in the nearby China market. However, we think price might not be able to surge significantly without the support from demand side.”