Asia Daily PP and PE Overview 20 Oct 2016

In China, futures prices on Dalian Commodity Exchange continue to three digits hike as the week proceeds. Contract 1701 for PP increased CNY211/ton ($31/ton) while LLDPE gained CNY130/ton ($19/ton). Both contracts settle at CNY7874/ton ($999/ton without VAT) and CNY9460/ton ($1200/ton without VAT) respectively.

Despite two consecutive sessions of surging futures prices, domestic spot offers for both PP and PE remain unchanged. Only LDPE film added another CNY150/ton ($22/ton) on the back of tightened supply and healthy demand. However, in term of sentiment, buyers are showing more confident that market might remain firm in the near term, therefore some have returned to make replenishment. A converter purchased two containers of locally produced homo-PP yarn at CNY8300/ton ($1053/ton without VAT), EXW China, cash term, said, “We managed to get the prices at the lower end of the overall price range within the Southern China region. We decided to only buy on need basis seeing strong speculative acts in the futures trading recently. On the other hand, we do not think PP prices could drop in large range in the near term as our suppliers are not having sales pressure.”

Import homo-PP to China has mostly breached above the $1000/ton mark and prices below this threshold become very scarce. A trader lifted Saudi Arabia’s homo-PP prices by $10-20/ton from yesterday, reaching $1010-1040/ton CFR China, LC 90 days term informed, “We think the shutdown at major Indian and Saudi producers might affect supply in the near term. Meanwhile, firming propylene costs also provide some support. Our customers are still reluctant towards the new offers; however, we believed that expected tightening supply would eventually give buyers more confidence to accept higher prices.”

In the PE market, HDPE film and LDPE film are being traded at diverged trend. Due to persistent lacking of availability and healthy demand from the greenhouse film sector, official offers for import LDPE film has escalated to near to $1300/ton levels, based on CFR China, LC 0-90 days term while trader’s prices have mostly breached above this benchmark. Suppliers, however, continue to fell disappointed with the state of demand for HDPE film, in which major suppliers are offering minor discount to entice buying interest. A trader reported receiving downward price revision from a Thai producer by $5/ton on HDPE film cargoes said, “Our suppliers informed that this round of offers has faced stiff resistance from the market as lots of buyers, including our customers tried to bid for lower offers yesterday. We feel that HDPE film with offers above $1150/ton level are difficult to be accepted by customers.”  

In Southeast Asia, the general buying interest has yet to witness any significant improvement while major regional producer have announced November delivery offers for PE cargoes with larger than expected hike. Indeed, the maker lifted LDPE film prices by $30/ton from last month to reach $1280-1290/ton CIF Vietnam, LC AS term while HDPE film prices are up $10-20/ton at $1170-1180/ton with the same term. Initial respond is a little less positive. A buyer received the new offers commented, “The hike is way beyond our acceptance levels. We might have to skip purchases this time if the supplier is firm on their cargoes as domestic market is still facing difficulties in moving up. We think healthy demand in China has supported such big jump.”

Healthy demand for LDPE film in the nearby China market in the past one month has supported producers to maintain firm stance on their offers to Southeast Asia recently. A regional producer informed, “We managed to sell well to China market and also sold out October allocation for Southeast Asia now. Market in on firming trend, yet significant increases might bump into resistance since regional demand is still not as strong as expected. We would announce new offer in the coming week.”

The PP market appears to be very steady on the stable to firmer track with the perceived of tightening supply in the coming month, in line with several major shutdowns, while suppliers are lacking of sales pressure. There are very limited numbers of new offers reported in Southeast Asia while indication for new prices are at higher levels. A buyer informed, “Our Middle Eastern supplier might announced new price tomorrow and we have been informed of a possibility of some small increment. We think at the current propylene costs, theoretical homo-PP prices at above $1000/ton is acceptable, yet market need to monitor further development as most shutdown crackers are deem to resume operation soon.”