Asia Daily PP and PE Overview 15 Nov 2016

In China, futures prices on Dalian Commodity Exchange have not been able to make it out of the depressing trading condition reported on Monday. PP futures continue to weaken CNY162/ton ($24/ton) to reach CNY8556/ton ($1066/ton without VAT). LLDPE futures slashed CNY250/ton ($36/ton) from yesterday to close at CNY9665/ton ($1204/ton without VAT).

Domestic spot market ended a volatile trading day with CNY200/ton ($29/ton) lower for both PP and PE cargoes. A trader in Ningxia managed to sell off 200 tons of material said, “We prefer not to hold inventories at the current market condition. Spot sentiment is negatively affected by falling futures trades. Near term outlook in domestic market therefore very uncertain.”

In the import market, traders who were holding firm stance on their Saudi’s homo-PP cargoes at $1060/ton last week are now offering $20/ton discount to reach $1040/ton CFR China, LC AS term. A Shanghai based trader informed, “Still our customers are not confident to make fresh purchases. Market is under the influence of multiple factors including the depreciation of the Chinese Yuan, falling futures and upstream costs. We only can close small number of deals.”

In the PE market, players reported that Thailand’s PTT is planning to permanently suspended all PE businesses based on contractual basis starting 2017. Several traders have not been able to renew their contracts for the coming year with a market source said, “Looking forward, our supplier plans to focus on domestic Thailand and Southeast Asia market, hence export allocation, especially to China, would be affected. However, spot offers would still be available.” Depending on the extent of allocation cut, the impact on China’s PE sector might be significant since the country still depends heavily on import to meet growing local demand. Market is waiting for further information.        

In Southeast Asia, the general market sentiment remains pretty calm as the week proceed with limited number of transaction reported. Several regional and international producers have announced new PE prices at stable to softer levels compared to previous offering. Indeed, a major Thailand producer decided to rollover their HDPE prices to Indonesia, yet reducing by $15/ton for HDPE film to Vietnam market. The maker’s latest offers stand at $1190/ton to Indonesia and $1140/ton to Vietnam, all based on CIF, LC AS term. A source close to the producer informed, “We maintain HDPE yarn stable at $1180/ton (with the same term) to Vietnam but the number of purchase inquiries is very disappointed. We are not having other products this month as other production lines are still under maintenance shutdown. Couple of our regular buyers have requested to negotiate and we might need to commit to discounts in order to close deals. ”

Meanwhile, a Malaysian converter purchased Middle Eastern LLDPE film cargoes at $1170/ton CIF, LC AS term. This lower end of the overall price range has rarely repeated in Southeast Asia in the past two weeks. The buyer commented, “We are happy with this cargo as price is well below the offers in local market. Our domestic supplier is still clearing the backlog and further price hike is very likely in line with the recent depreciation of the ringgit.”

The recent drop in ethylene costs, in addition to falling energy market has casted shadow on the bullish sentiment that was supported by healthy buying interest in China. Compared to mid-October, ethylene cost base on CFR Southeast Asia term fell $100/ton on rising regional supply. Buyers are very cautious.

In the PP market, regional suppliers are very optimistic that tightening supply would continue to push prices up. Major Thailand maker has implemented $20-30/ton hike on homo-PP offers to Indonesia today with a converter informed, “Our Vietnamese supplier has also indicated $30/ton increase from last week. That would make Vietnamese homo-PP prices at $1160-1170/ton CIF Indonesia, LC AS term. We don’t think we can accept any further price hike at the current end product demand condition.”