Asia Daily PP and PE Overview 28 Oct 2016

In China, futures prices on Dalian Commodity Exchange again recorded significant hike with contract 1701 for PP settled CNY297/ton ($44/ton) higher, reaching CNY8407/ton ($1060/ton without VAT). Same contract for LLDPE film surged CNY265/ton ($39/ton) to close at CNY9870/ton ($1244/ton without VAT).

Domestic spot prices for both PP and PE also firmed up CNY50-100/ton ($8-15/ton) thanks to strong futures trading and resilient buying interest. It is reported that the number of deals concluded in local market remain satisfactory and traders continue to limit their offer quantity with hope to achieve better margins in the next trading day. Several converters in the agriculture film sector in Northern China are reducing operation rate as the off-peak season approaching, while many others claimed to have end product orders till end of November.

In the import market, traders are attempting to increase Saudi’s homo-PP prices to $1060-1070/ton CFR China, LC 0-90 days term with intention to test market respond. However, the result is disappointed. A trader said, “Most buyers expressed buy ideas at about $1020/ton levels, which we cannot meet at the moment. There are very limited numbers of offers due to the upcoming shutdowns and we believed that market would remain on the firming trend in the near term.”

USA origin HDPE cargoes started to show up in China market again at $1100/ton for film and $1110/ton for blow molding grade, shipment from end December to mid January. There are more reports on a tightening HDPE blow molding supply in the country stemming from couple major supplier’s shutdowns and this condition is expected to remain in place in the coming month.

In Southeast Asia, regional domestic markets continue to see improvement in term of demand, yet traders are still reporting difficulties they faced in lifting prices in the same pace with international market. A Vietnamese trader informed, “We managed to sell very well in the past two days, however, buyers seem slow down a little today after we implemented a small hike on our cargoes. Local homo-PP supply is comfortable and more cargoes shall arrive in November, which might restrain any significant price increases.”

On the other hand, converters here have accepted higher import prices, in which an international trader reported to have sold 400 tons of Saudi Arabia homo-PP at $1040/ton CIF Vietnam, LC AS term, $20/ton increased from the previous opening. In contrast, Indonesian players are still showing reluctance towards prices at the upper end of the overall price range, claiming the availability of more competitive local cargoes. An international trader offered Middle Eastern homo-PP at $1040/ton CIF Indonesia, LC AS term commented, “We withdraw our offers after received bids at $40/ton lower than initial prices. We might divert our cargoes to other market, where acceptance levels are better.”

It is interesting that several LDPE film cargoes from various origins have been re-exported from Vietnam to China today. A Chinese trader purchased Saudi Arabia’s LDPE film at $1290-1300/ton CFR China, re-exported from Vietnam said, “We also received offers for Malaysian LDPE film at $1360/ton with the same term, but decided to go for the lower costs cargoes. Demand for LDPE film in China is still very strong and the current supply tightness might only be eased by mid-November. We think this condition might attract more re-export cargoes in the coming week.”

Healthy demand in China has also encouraged supplier to lift LDPE film prices to Southeast Asia region, and latest offers from a Middle Eastern producer indicated $80/ton hike compared to earlier this week, touching $1360/ton CIF Vietnam, LC AS term. A market source informed, “We think Vietnamese buyers are not ready to accept such hike. There are still other suppliers keeping their offers are more competitive levels. However, this might encourage domestic traders to increase prices as well.”