Asia Daily PP and PE Overview 10 Nov 2016

In China, futures prices continue to hike, though the range of increases narrow down compared to the past two sessions. PP contract added CNY186/ton ($27/ton) to reach CNY8909/ton ($1121/ton without VAT). LLDPE contract only advance CNY70/ton ($10/ton) to close at CNY10,260/ton ($1291/ton without VAT).

Price list for both PP and PE from domestic major producers showed an increase of about CNY100/ton ($15/ton) compared to yesterday with the main support derived from strong futures trade. However, traders in Northern and Southern China are not seeing the desired demand condition, from which some discounts of CNY50-100/ton ($8-15/ton) are given to attract buyers.

A trader in Guangdong commented, “Trading activities are weaker now. Our profit margins are very small as domestic makers hold firm on prices while market acceptance is CNY300-400/ton ($44-59/ton) lower. This would most probably cap prices from further hike in the near term.”

It is reported that traders are taking cargoes in the spot market to leverage the arbitrage opportunity offered by futures trading and this would help in keeping PP and PE prices on the stable track in the near term, sources said.

Meanwhile, in the import market, players reported visible pick up in HDPE film demand due to limited availability of Iranian cargoes recently. Prices have inched up slightly compared to last month, yet, would HDPE film offers be able to catch up with other PE film grades, many players doubt this.

Import homo-PP to China followed a very steady trend and it appears that buyers are still accepting Middle Eastern cargoes at the level $1050-1060/ton CFR China, LC 90 days term. A trader informed, “We managed to sell out 1000 tons of Saudi homo-PP at $1055/ton today. Many traders are asking to USA cargoes at the level $1020/ton to take advantage of the gap between spot and futures market.”    

In Southeast Asia, market stays largely unchanged a day after the USA presidential election. Players were initially fear of an immediate impact on the general sentiment; however, the implication of the event on the petrochemical industry remains to be seen. Discussing this issue with several regional converters, whose end products ranging from shopping bags to household products, and active in exporting to the US market, find no impact on near term orders. A Vietnamese converter informed, “Our export activities to the US is stable and our end product customers have yet to notify us about any changes in order quantity. We, however concern about longer term prospect as any potential policies change in tariff and trade agreement might generate ramifications on our business.” The sources added that PP suppliers are holding very firm stance on their cargoes claiming lacking of availability, in which they planned to source on need basis only.

On the other hand, a major Saudi Arabia producer rollover homo-PP offers to Vietnam at $1040/ton, CIF Vietnam, LC AS term. Initial respond from traders is not as positive as expected mainly due to persistent weak domestic demand in this market. A trader informed, “We plan to bid for $30/ton discount at least as this cargo would only arrive in February 2017, and together with the hike in import duty, costs would be too high and too risky.”

Several other international suppliers have also rolled over their homo-PP offers to Vietnam from last month, indicating some signs of a stabilising market. Looking ahead, the prospect of the Southeast Asian PP market depends heavily on the state of demand in China. There are so much of uncertainties involved, however, the scheduled shutdown in November would play an important role in preventing PP prices from any drastic drop, players said.

Meanwhile, the regional PE market has yet to witness new development except couple of international suppliers claimed to have received better number of inquiries for import HDPE film from Indonesian buyers. This is totally contradicting with what domestic traders are witnessing in this market with a market source said, “Converters are definitely holding low inventories for HDPE film, however, we would describe the state of demand as stable to weak.”

The LDPE film market sees better acceptance amongst buyers for higher prices amid persistent healthy buying interest in China. A regional producer informed, “We were struggle to sell our cargoes at $1300/ton last week, yet this week buyers are requesting for additional quantity at the same levels. We have no quantity left for Southeast Asia market since we can achieve sales at $50/ton higher in China.”