Asia Daily PP and PE Overview 04 Nov 2016

In China, futures prices on Dalian Commodity Exchange continue to move south on the final trading day of the week, dropping three digits and reversing much of the gains it recorded earlier this week. Contract 1701 for PP slashed CNY181/ton ($27/ton) to close at CNY8274/ton ($1046/ton without VAT) and LLDPE futures dropped CNY120/ton ($18/ton) to reach CNY9865/ton ($1247/ton without VAT).

In domestic market, buyers are negotiating very hard for discounts after continuous dropping in futures trades, hence all efforts to increase prices further have technically failed. Traders in contrast, are offering CNY50-100/ton ($8-15/ton) reduction on both PP and PE parcels in order to smoothen sales process.

A trader sold coal based homo-PP raffia at CNY8350/ton ($1056/ton without VAT) and LLDPE film at CNY9700/ton ($1226/ton without VAT) EXW basis, said, “We have to commit to CNY100/ton ($15/ton) discount after attempted to hold offers stable earlier but could not close deal. Players are very cautious these days as the result of the USA presidential election would impact the financial market.”

The general sentiment in the import market is also slow, players reported; with most offers remain unchanged from the previous trading session. One interesting remark is that Iranian PE cargoes are tighter than usual and a distributor informed, “Besides plant issues, our Iranian principal supplier is paying more attention to European market after sanctions were lifted. We are still able to secure some HDPE cargoes, however, LDPE and LLDPE is rather limited, and even contract prices have increased.” The source added that their supplier is planning to hold firm stance on the PE cargoes till end of the year given lack of inventories pressure.

Despite diminishing buying interest toward the end of the week, Chinese traders believed that market is not ready for a down turn with most suppliers, in both domestic and international market are not facing high sales pressure. However, there are also opinions that further price hike shall very unlikely to be accepted as converters are suffering from negative profit margins.      

In Southeast Asia, market ended the week on quiet note as plunging energy and upstream costs affected buyer’s confidence. Indonesian players reported a visible slowdown in trading activities compared to earlier this week, which mainly due to stiff market resistance towards significant price hike from local producer. A converter said, “Domestic offers increased three times this week and our end product customers are not accepting such high levels, therefore several of our purchased orders are still on hold.”

International suppliers, who are offering to Indonesia, are also experiencing weaker buying interest with a trader said, “We maintain our Middle Eastern homo-PP at $1040/ton CIF Indonesia, LC AS term but receive no bid till now. This is out of our expectation as tightening supply by right, should incite market sentiment.” Players in the country blamed unstable political condition to be one of the major factors causing uncertainties and discourage replenishment activities.

Besides, news about Malaysia’s Lotte Chemical Titan and Saudi’s PetroRabigh postponed their maintenance shutdown to first quarter 2017 have also brought up some concerns amongst regional players. However, further observation is necessary before any conclusion on the possible impact is stated.

In the regional PE market, despite the high tempo reported in the Chinese’s LDPE film market, the Southeast Asian sentiment is still lag behind. Buyers are very reluctant to accept prices above the $1300/ton threshold, especially long shipping time cargoes. A Vietnamese buyer purchased Saudi Arabia’s LDPE film at $1300/ton CIF, LC AS term informed, “We accepted such prices due to the promptness of the cargo. Higher prices are too risky, especially when demand in China seems to be stagnant now.”

Another regional producer, whose offers stand at $1300/ton for LDPE film and $1200/ton for HDPE film and blow molding, CIF SEA, LC AS term informed, “We could not move any cargoes this week as our customers are complaining about high prices. This condition might persist in the near term if energy and ethylene costs continue to drop in the coming week.”