Asia Daily PP and PE Overview 20 Oct 2016

In China, futures prices on Dalian Commodity Exchange weakened towards the end of the week. Contract number 1701 for PP inched down CNY30/ton ($4/ton) reaching CNY7815/ton ($991/ton without VAT) while LLDPE contract slid CNY20/ton ($3/ton) at CNY9435/ton ($1196/ton without VAT).

In domestic market, spot PP and PE offers mostly firmed up CNY50-100/ton ($8-15/ton) compared to the previous trading session, except LDPE film added CNY100-200/ton ($15-30/ton) as supply tightness remain in place. Buying interest is reported to be normal as buyers continue to take in cargoes on the belief that prices might hold firm in the near term. In fact, up to Thursday, total PP and PE inventories at domestic major producers’ warehouses fell 56,000 tons from earlier of the week, private data showed. This indicated minimal sales pressure on the sellers’ side.

A packaging manufacturer from Zhejiang said, “However, pressure from new start up plants might be clearer in November, and for this we would only source on need basis for the rest of the month though our end product business is stable.”

In the import market, homo-PP offers to the country below $1000/ton threshold has technically disappeared, and buyers have accepted to purchase Middle Eastern cargoes at as high as $1020/ton CFR China, LC 0-90 days. A trader informed, “We were offering at $1010/ton earlier this week but unable to conclude deals, however, due to market perceived of possible supply tightening after several major overseas producers announced maintenance shutdown in November; we managed to conclude good quantity at $1020/ton today. This condition might persist in the coming days.”

Players are also showing their concern over the prospect of HDPE market since persistent weak demand that pressure prices for an extended period of time have discouraged international suppliers to offer material to this market. Many traders are found to have stocked up HDPE injection and blow molding in expectation of stronger trend.

In Southeast Asia, the general market sentiment appears to have some improvements from the previous trading sessions as market is weighting the impact of major PP plants shutdown in November on the supply. Regional buyers cautiously replenish material, fearing that supply might be tightened in days ahead. A Vietnamese buyer purchase Saudi Arabia’s homo-PP at $1020/ton CIF, LC AS term commented, “Market might continue to firm up given healthy demand in China. We received very limited number of new offers from overseas suppliers this week, mostly at $10/ton higher. The shutdowns in November might also create some support on the general sentiment.”

In Indonesia, several buyers have expressed their intention to replenish material ahead of the shutdown at Chandra Asri’s PP plant this coming month. A converter purchased some cargoes informed, “Overseas suppliers are lifting their offers beyond our acceptance levels, therefore we source material from local market. We are quite concern with the upcoming shutdown, and for this, we have stocked up material till end of November.”

It is also worth noting that propylene costs based on FOB Korea term fell $45/ton on Wednesday, to reach $810/ton. If this condition persists in the near term, the extent of price increment might be limited, players commented. On the optimistic side of the market, players are also looking at more supportive factor such as strong energy values and expected improve demand during year season, which could push prices higher.

In the PE market, a Malaysian major has down adjusted their LDPE prices to Vietnam by $10/ton from the initial November shipment offer due to strong market resistance. A buyer commented, “We purchased very regularly, but this time we think prices are too high. Domestic market is still weak and we almost make no profit buying at this level. We planned to only purchase a small quantity this time.” There are very limited number of LLDPE and HDPE film offers reported in the country, though major Saudi Arabia producer has indicated further price increment in the near term.

Sellers in Indonesia continue to see disappointed demand condition for PE and attempts to increase prices have yet to yield satisfied returns. Players attributed persistent weak end product business to be the main culprit. A market source said, “Most PE manufacturers are still not operating at full rate though this supposed to be the peak seasonal demand. We are not very optimistic about the near term outlook.”