Asia Daily PP and PE Overview 01 Nov 2016

In China, the gaining speed in futures market appears to have slow down a little with PP contract only adding CNY45/ton ($6/ton) after hitting the maximum daily hike allowed in the pervious session. LLDPE contract also recorded minor gain of CNY70/ton ($10/ton). Both contracts settled at CNY8672/ton ($1093/ton without VAT) and CNY10,110/ton ($1273/ton without VAT).

Trading activities in domestic spot market is reported to remain stable, however, a portion of buyers have started to show reluctant towards the continuous price increment. Today, local producers lifted PP prices by CNY100-250/ton ($15-37/ton) and PE prices by CNY50-300/ton ($8-44/ton) from yesterday and a packaging manufacturer in Zhejiang responded, “We prefer to take cautious stance, buying only small quantity each time. We are pushing for final orders of the China’s Single Day sales event. We think limited supply for homo-PP yarn and LDPE film might hold the market firm this week; yet fear of correction towards the month end.”

In the import market, it is interesting that not only USA’s HDPE cargoes are showing up in China but also homo-PP parcels. A buyer received offers at $1030-1040/ton CFR China for homo-PP yarn, injection, fibre and BOPP from USA said, “Our supplier is open to negotiation and we find this offer to be competitive, just that cargoes would only arrive by end of January 2017.” Despite weaker buying interest for import homo-PP observed this week, traders remain very optimistic about the sustainability of the current firming trend.

Meanwhile, LDPE film prices continue to increase with deals for prompt cargoes heard at above $1400/ton mark. On the other hand, both major HDPE suppliers from Thailand and Iran are delaying delivery of cargoes due to transportation issues, which result in a slight reduction in availability, players reported.    

In Southeast Asia, sentiment in certain market turns sour as the week proceed with traders in Vietnam moved to cut domestic PP and PE offers in line with rising local supply. A trader offered locally held Saudi’s homo-PP at 25,900,000/ton ($1055/ton without VAT) based on FD Vietnam, cash term, a VND200,000-300,000/ton ($9-13/ton) reduction from last week. The source informed, “We only managed to sell a small quantity to regular customer today. Local traders are psychologically affected by falling crude oil and also due to large arrival of previously purchased cargoes, therefore everyone prefer to deplete stock.”

As a result, international supplier’s effort to increase import homo-PP prices to the country is facing stiff resistance. In fact, couples of producers have stepped back on their hike target in the absence of buyers. An international trader reported, “It is really hard to conclude deal this month as our customers are fully covered till early January. We managed to sell off the assigned quantity but with additional discount which dented our profit margins.”

The Southeast Asian PP market is facing great uncertainty due to the coexistence of diverged factors, including falling upstream costs and sluggish buying interest, yet a series of PP plant shutdown might tighten supply in November. For the immediate term, market trend depends heavily on the state of demand in near-China market.

Meanwhile, Indonesian buyers appear to have accepted a $50/ton hike local producer implemented in two trading days though many claimed sufficient stock from earlier replenishment. A converter commented, “There are not many choices left for us since both domestic and overseas suppliers are having limited availability. We could not find any offers for Southeast Asian material below the $1140/ton mark this week and we think it is seller’s market now.”

Regional PE market is calmer to some extent with suppliers mostly rolling over their prices for HDPE film while giving higher indication for LDPE film cargoes in line with strong demand condition in China market. However, it is clear that Southeast Asian buyers are not ready to accept prices at the levels reported in China right now. A regional buyer said, “Our customers for end products are not approving such hike, from which several of our end product PO are on hold now. Southeast Asian buyers might take really long time to accept such price.”