Asia Daily PP and PE Overview 07 Nov 2016

In China, futures prices on Dalian Commodity Exchange continue to drop with both major contracts slashed three digits just on the first trading day of the week. PP futures fell CNY139/ton ($20/ton) to reach CNY8273/ton ($1040/ton without VAT) while LLDPE futures settled at CNY9790/ton ($1231/ton without VAT), some CNY170/ton ($25/ton) lower than the previous session.

Sentiment in local market is rather heavy with traders offer CNY50/ton ($8/ton) reduction on both spot PP and PE cargoes, yet the number of deal concluded is disappointed, players said. In the import market, Middle Eastern homo-PP below the $1050/ton mark disappeared in the past two weeks is now emerged again. A trader purchased Saudi Arabia’s homo-PP at $1045/ton CFR China, LC AS term informed, “Our suppliers initially allocated only 1000 tons to China but respond was good, hence market received additional 1000 tons at the same price, mostly traders purchased. Converters are not in hurry to replenish material, yet we think market might sustain the stable trend in coming days.”

Meanwhile, other players are expecting a small range of downward adjustment as producer’s profit margins are well above the theoretical costs at the current propylene prices.

There are very limited numbers of new PE offers from international suppliers observed, however, traders are maintaining their prices unchanged with $5-10/ton discount on deals. A trader said, “We managed to conclude some quantity of HDPE injection and blow moulding to local buyers after committed to discounts. Our customers are very cautious in their purchases claiming high uncertainties arise from falling upstream market. Many prefer to monitor the outcome of the USA presidential election and the impact on the financial market before making decision.”

In Southeast Asia, market opens the new week on rather quiet note with very limited number of new offers reported. Players in both PP and PE market are expressing their concerns over the recent drop in energy and monomers costs while discussing about the possible impact on the downstream market. Ethylene prices in Asia in fact has fallen below the $1000/ton threshold for the first time in nearly nine months on improved supply condition, and with the restart of Shell Singapore’s cracker, industry experts are looking at further reduction in days to come.

The implication on the PE market is still uncertain at the moment since most suppliers are not having sales pressure and a regional buyers commented, “In addition to the adjournment of maintenance shutdown at Saudi’s PetroRabigh and Malaysia’s Lotte Chemical Titan, PE supply might not be as tight as it was initially expected. Suppliers are not in the position to reduce their offers, however we think any attempt to increase prices will bump into resistance.”

Meanwhile, it is reported that Saudi’ Sadara has started to market its LLDPE C4 film to Vietnam this week after commenced commercial run in August 2016. A buyer received the offers at $1190-1200/ton CIF Vietnam, LC AS term informed, “The cargoes will be shipped from Malaysia. We bid for $10-20/ton discount but our supplier refused to accept. We find this offer to be less competitive especially it is totally new grade to buyers. We are not planning to make additional replenishment at the moment given the current condition in the upstream market.”

Most major PP suppliers have yet to announce new offers to the region, however, it appears that prices are stabilizing in the import ground while buyers are not showing interest in making fresh purchases claiming comfortable inventories. In regional domestic markets, a key producer in Indonesia lifted local PP prices for the fifth time since November begins, totaling more than $100/ton increased compared to last month. However, buyers are resisting such rapid price increment, in which distribution market is now offering discounts to smoothen sales process. A local trader informed, “We were selling very well until mid of last week. Demand for homo-PP yarn is especially weak due to the off peak season, and we are offering $10-20/ton quantity discount, yet the number of deals is rather disappointed. Domestic major implemented another $30/ton hike today and we are not planning to match the latest price increment.”