Asia Daily PP and PE Overview 11 Nov 2016

In China, futures prices on Dalian Commodity Exchange continue to jump on the last trading day of the week, especially PP contract. January delivery PP futures surged CNY252/ton ($37/ton) to reach CNY9070/ton ($1138/ton without VAT) while LLDPE contract inched up subtly by CNY45/ton ($7/ton) to close at CNY10275/ton ($1290/ton without VAT).

Thanks to continuous firming futures trade, domestic spot market today witness CNY100-150/ton ($15-22/ton) increased on both PP and PE cargoes. In northern region, LLDPE film prices are up CNY300/ton ($44/ton) compared to the previous trading session. It is reported that major domestic producers have suspended their offers toward the second half of the day with expectation that prices would continue to firm up. Converters are not very responsive towards such move, but a large portion of deals concluded are from traders, who are active in dealing with both spot and futures market. “We search for spot cargoes at the lower end of the overall price range and trade on futures platform to make a margins of about CNY140/ton ($21/ton) for both LLDPE and PP,” a trader informed.

In the import market, buying interest for homo-PP regain the heat to a certain extent with a trader informed, “We concluded several deals for Middle Eastern homo-PP at $1060/ton CFR China, LC AS term while most other transactions at $10/ton lower. We think this trend might sustain through out December, as converters need to replenish material in preparation for Lunar New Year orders. Moving to January, the current momentum might loose steam.”

Suppliers for HDPE film continue to claim healthy sales with minimal discount given due to constraint supply condition. A Thailand producer sold HDPE film at $1175/ton and LLDPE film at $1280/ton CFR China, LC AS term said, “Sales for these two grades are satisfactory, just the number of purchase inquiries for LDPE film dropped compared to last week. We are very optimistic about the market trend in the coming week.”   

In Southeast Asia, plunging local currency against the USD has stimulated some activities in domestic Malaysia and Indonesia, while other markets in the region remain mostly stable. According to media report, the Indonesian rupiah fell to five years low on Friday, prompting the nation’s central bank to voice their intention to step in to stabilise the market. As an immediate respond, a major local producer lifted offers for both PP and PE by approximate $45-50/ton compared to earlier this week. A trader informed, “We withhold our offers to monitor further movement. Demand is very weak at the moment, especially for PE, therefore we are not very confident about the market acceptance level.”

What have been widely observed in Indonesia is that buyers are taking action to stock up additional inventories, worrying that further depreciation of local currency would push prices higher; however, only at the previous offer levels. A HDPE bags converter informed, “We negotiated with our supplier to make payment in cash, in return to get Monday’s prices. At the moment, we are covered till December, hence perfer to monitor market further.”

Meanwhile, in Malaysia, domestic producer withdrew their offers instantly and further price hike is inevitable, sources said. This takes place just a day after local makers implemented MYR30-100/ton increment on both PP and PE cargoes.

The regional PP market remains largely stable and supplier’s inability to increase prices the same pace as in China has shown clearer than ever. As major Saudi Arabia rollover their homo-PP prices to Vietnam in the previous trading session, deals are concluded at $15/ton discount, reaching $1025/ton CIF Vietnam, LC AS term, well below prices in near-by China market for the same material. A Vietnamese buyer said, “We decided not to proceed with purchases since local market is slow and ample supply. This cargo would only arrive in February, the time that market is normally weak due to post Lunar New Year condition.”

China buyers have surprised the whole regional market with strong and persistent buying interest since after the National Day holidays in early October 2016. Import offers for both PP and PE to China are now standing well above of that in Southeast Asia market – a condition that normally regarded as unsually due to the volume. This condition does not seem to recede anytime so soon as the general sentiment in China is supported by heavily speculative activities on Dalian Commodity Exchange.

In related plant news, Saudi’s PetroRabigh decided to go ahead with the maintenance shutdown schedule after consideration of postponing to Q1 2017. The company will take its 1.3 millions tons/year ethane cracker, the no.2 PP line and PE plants off-stream for three weeks in November. Meanwhile, Indonesia’s PT Pertamina has also shut its 50,000 tons/year PP plant for a month long maintenance work since late last week.