Asia Daily PP and PE Overview 17 Nov 2016

In China, futures prices on Dalian Commodity Exchange continue to move lower, marking the fourth consecutive session of loosing. However, the reduction pace is somewhat slowing down. January delivery contract for PP settled at CNY8512/ton ($1058/ton without VAT), some only CNY65/ton ($10/ton) lower than the previous trading day. LLDPE contract inched down CNY70/ton ($10/ton) to close at CNY9655/ton ($1201/ton without VAT).

In domestic spot market, except LDPE film offers remained mostly unchanged, PP and other PE grades continue to drop CNY50-150/ton ($7-22/ton). Buyers are negotiating hard to make purchases at the lower end of the overall price range which helped to hold total PP and PE inventories at local producer’s warehoused at the low side. Despite stable offers reported today, the LDPE film is clearly loosing temperature. Buyer are not accepting any further hike amid negative end product margins, and the resistance is so strong that local traders have been giving discounts since earlier this week to facilitate the deal concluded. Market participants commented that further reduction is necessary, however, no international supplier raise intention of cutting prices in the absence of sales pressure.

Meanwhile, import homo-PP from Middle East to the country see little changes, just yet, couple of USA homo-PP cargoes are concluded at $1015/ton CFR China, LC 90 days term, making the new lower end for this week’s prices. A trader purchased some quantity of this origin commented, “Our supplier agreed to larger discount after domestic sentiment turn weak these few days.”

Another trader sold Saudi’s homo-PP at $1040-1050/ton CFR China, LC 90 days term said, “It is very hard to attract buying attention at the upper end of the offer levels as domestic material is traded at same par now. We think more suppliers will open offers to China in the coming days given healthy margins here.”

Meanwhile, USA’s shale gas based PE cargoes also started to show up in China in the form of trader packaging. An international trader informed, “We have approximate 4000 tons of shale gas based HDPE and LDPE film at the moment and we are planning to regularized these cargoes to China in 2017.        

In Southeast Asia, more international producers announced new offers to the region; however, sentiment is here badly dampened by falling currency exchange rate against the US dollars. The Indonesian rupiah, Malaysian ringgit and Vietnamese dong have all depreciated recently. On the other hand, domestic suppliers in these markets are facing difficulties in convincing buyers to accept price increment as a result of weaker local currencies.

A Vietnamese trader received homo-PP offers from couple of Middle Eastern producers at $1030-1040/ton CIF, LC AS term said, “We are not planning to make any replenishment until we can deplete some of our stock. International suppliers are very firm on their offers claiming limited supply, however local market is quite plentiful. There will be more cargoes arrive market in December; however, one of our warehouse service providers has already turned away from customers due to running out of storage space. December outlook does not seem so optimistic to us.”

An Indonesian buyer received Saudi’s homo-PP at $1055/ton CIF, LC AS term said, “Market here is very quiet due to the Propak Exhibition. We have sufficient material till end of January and not in rush to make additional purchases. Besides, local suppliers are not the on one having difficulties in lifting raw material prices; we are unable to transfer higher costs to end product prices too.”

Meanwhile, a major Southeast Asian producer announced final LDPE film prices to Vietnam for December delivery at $1330-1340/ton, some $60/ton hike from last month. This is in line with the firm trend observed in near-by China market; however, many buyers decided to cut down on purchase quantity amid high risk. A buyer bought 2 containers of the material at $1330/ton said, “We only procure 50% of the allocation as domestic market is not catching up with international offers. Together with the weakening energy and upstream market, we prefer to take caution about near term outlook.”

Philippines converters are pushing for Christmas orders and many regarded this time of the year as peak season. Expectation for December among Philippines players are rather bearish given the long holidays.