Asia Daily PP and PE Overview 09 Nov 2016

In China, futures prices on Dalian Commodity Exchange recorded significant hike today with both contracts settle with three digits higher. PP futures jumped CNY382/ton ($57/ton) from yesterday to reach CNY8808/ton ($1114/ton without VAT) while LLDPE surged CNY320/ton ($47/ton) to close at CNY10,240/ton ($1295/ton without VAT).

Domestic spot market, however, witness another CNY50-100/ton ($8-15/ton) reduction for both PP and PE cargoes despite two consecutive sessions of gain in futures trade. Prices could have fallen deeper without the support of strong Dalian Commodity Exchange, player said, due to weakening demand condition. A trader informed, “Our customers made some small purchases only after obtained discounts. Near term outlook is really cloudy with a number of contracting factors affect the trend, however, we are not expecting any drastic movement as propylene costs started to increase again.”

Converters, however do not believed in the notion that PP market could sustain the stable trend and further discount is necessary as buyers refused to keep high inventories toward year end. This is translated into a rise in domestic total PP and PE inventories at major producer’s warehouses. Private data showed an increased of 15,000 tons of material on Tuesday compared to earlier this week.

Neither import market can make itself exempted from sluggish buying interest in the country. As reported earlier, homo-PP prices to the country softened slightly and traders find it difficult to attract buying interest at the levels they used to conclude deals couple of weeks ago. In contrast, HDPE film market is regaining its fames mainly due to lack of availability from Iranian suppliers. Yet, cargoes priced above the $1200/ton mark attract no attention either.

One of the not so positive piece of information obtained is that several converters in the agriculture film sector are now selling LDPE film to open market instead of using for their own production. One of the sources informed, “LDPE film prices have increased approximate CNY3000/ton ($442/ton) in the past one month but we are only able to transfer CNY1200/ton ($177/ton) of the costs to end products. We have switched to use recycle and power form grade to cut down the loses, however, we will not be able to sustain such condition for long.”  

In Southeast Asia, trading activities are very limited today as players are monitoring closely the result of the USA presidential election and discussed about possible impact on the petrochemical industry. There is no conclusive implication of the event on the market trend; however, many buyers prefer to hold their purchase decision for clear direction. A buyer received LLDPE film offers from two Middle Eastern producers at $1190-1230/ton CIF Vietnam, LC AS term informed, “We are not confident to make purchases at the moment though there is no clear sign of a downward price adjustment. We have comfortable stock hands, hence prefer to wait and see on the sideline.”

An international trader sold Middle Eastern HDPE blow molding at $1120/ton to the region added, “We committed to $20/ton discount and managed to sell a good quantity. Buyers are very cautious about the likely market trend in the near term and we think clearer direction shall be observed now that the USA presidential election is finalized.”

Similar situation is reported in the PP market and offers at the upper end of the overall prices range are facing stiff resistance. An international trader offer Saudi Arabia homo-PP at $1050/ton CIF Vietnam informed, “We are very disappointed with the state of demand at the time that buying interest should be strong in line with year end order preparation. Local supply is comfortable due to the arrival of previously purchased cargoes. We think it is very hard for PP to increase any further.”

The general sentiment is further dampened as demand in China shows signs of slow down and discounts are given to stimulate sales. In this condition, an Indonesian buyer informed, “We were initially considering to make additional purchases, however, we decided not to keep inventories beyond December. Our end product is weak and there is so much of uncertainties ahead, especially the energy and financial market is dropping.”