Asia Daily PP and PE Overview 18 Nov 2016

In China, futures prices extended losses on the final trading day of the week, marking five losing sessions in a row. Most actively traded January contract settled lower by CNY218/ton ($32/ton) for PP and CNY230/ton ($33/ton) for LLDPE. Both contracts have returned to similar levels as they are traded in spot market, close at CNY8308/ton ($1031/ton without VAT) for PP and CNY9420/ton ($1169/ton without VAT) for LLDPE.

Futures market definitely encountered a correction week after the government stepped up effort to eliminate speculative activities. Domestic producers have waited the whole bearish week before implementing first official price adjustment of CNY150/ton ($22/ton) lower on both PP and PE cargoes. Trading activities however, did not pick up; instead buyers decided to postpone purchases to the coming week on anticipation of further discount.

A trader said, “We have been calling customers to offer material but buyers only make small purchases. Many of our regular buyers become inactive in the market this week. Near term outlook is rather bearish.”

Another market participant added, “Domestic producers committed to the first official price cut this week; yet price list is still well above the actual market levels. It makes sense for buyers to adopt wait and see stance. On the other hand, propylene and ethylene costs have firmed up, which will be a plus for supplier in this tug-of-war.”

Meanwhile, only import offers for Thailand’s LDPE film stand at $1400/ton at the moment; prices above this mark have disappeared from the market. On an average, import LDPE film to China dropped $30-50/ton compared to last week on persistent sluggish demand. It is obvious that the strong demand for LDPE film is now loosing steam, and domestic parcels are not an exception. Local offers for this grade have decreased about CNY300/ton ($44/ton) this week with a trader commented, “We think LDPE film price must drop at least CNY1000/ton ($145/ton) in order to bring buyers back to the market.”   

In Southeast Asia, market ended the week with little changes in term of trading activities as buyers cautiously monitoring further development in near-by China market while depreciation of local currencies is affecting the general sentiment. In Vietnam, most local traders have withdrawn their prices after the Vietnamese dong nosedive against the US dollar. A trader in the country said, “We have not offered anything in the past two days, hoping to increase our offers in the coming week due to weakening local currency. However, we are not very confident about implementing any hike as demand is weak amid comfortable supply.”

Meanwhile, a major Korean producer opens new homo-PP offer to the country at the level $1080/ton CIF Vietnam, LC AS term, which is higher than last month with a producer source said, “Prices in Southeast Asia are moving higher due to firm trend in China, but lacking of fundamental support from the demand side. We have not been able to conclude any deal in Vietnam at such high prices. Most buyers here are looking at the level $1000-1010/ton at the moment.”

The resistance toward offers at the upper end of the overall price range is also strong in Indonesia market, especially with weaker propylene monomer cost within the region. A converter received Philippines homo-PP at $40/ton reduction compared to last week at $1140/ton CIF Indonesia, LC AS term said, “Our supplier refused to give any further discount. With the Indonesian rupiah reach multi years low, this price level is a little bit too high for us. We need to plan carefully before commit to fresh purchases.”

The regional PE market holds mostly stable and several deals are reported at discount. Indian LLDPE film sold in Vietnam at $20/ton discount from the initial offer levels, reaching $1170/ton CIF, LC AS term. Major Middle Eastern producers are surveying market respond before announcing fresh offers for December shipment and buyers across the region have expressed their buy idea for LLDPE film at the range $1170-1180/ton CIF term. Meanwhile, weaker demand for LDPE film in China also encourages suppliers to offer discount in Southeast Asian region. In fact, Thailand LDPE film again concluded below the $1300/ton benchmark in Vietnam, which was not available in the previous week.