Asia Daily PP and PE Overview 22 Nov 2016

In China, futures prices sustained the rebound it made in the previous trading session. Most actively traded January delivery contract closed at CNY282/ton ($41/ton) higher for PP and CNY200/ton ($29/ton) for LLDPE. Both contract settled at CNY8747/ton ($1085/ton without VAT) and CNY1213/ton ($9775/ton without VAT) respectively.

While firming futures market is expected to boost sentiment and trading activities in spot ground; it doesn’t really happen these two days. Spot price lists from major local producers continue to slide CNY50-150/ton ($7-22/ton) for both PP and PE cargoes. And it is a double impact for China’s PE market as deep-seas cargoes widely traded below the $1100/ton threshold today.

A trader in Ningbo received USA LLDPE film at $1070-1080/ton CFR China, LC 90 days term said, “Our supplier agreed to give $10-20/ton discount on deals, but we insist on $1050/ton level to take 3000 tons. The shipment is a bit long, yet prices are just too competitive.” Indian PE cargoes are also traded in the range $1080-1090/ton with the same term. As an effect, purchasing activities for cargoes offered at the upper end of the overall price range are technically stalled.  

In another news, Braskem Idesa has started to offer LDPE cargoes from its new plant in Mexico to China, though the company is pushing for long-term contract basis. The LDPE plant is capable of making 300,000 tons/year.

In the PP sector, several traders are holding offers for Middle Eastern origin at $1050-1060/ton CFR China term, and starting hitting the wall when others have accepted deals at $1010-1020/ton levels.

In Southeast Asia, market started to show signs of a softening trend, especially for LLDPE film, with major Saudi Arabia producer slashed prices to speed up sales. In fact, the maker reduced LLDPE film offers to Vietnam by $30-40/ton compared to earlier this month to reach $1190/ton CIF Vietnam, LC AS term. This comes as a surprise to many players as other suppliers are holding steady or even lifted their prices. A converter said, “We did not expect this to come since our supplier has been claiming tight availability for some time now. We purchased a large quantity at the beginning of the month at $1230/ton and we are covered till late January.” Domestic traders in Vietnam, meanwhile attempting to increase local prices after the Vietnamese dong depreciated steeply against the USD. The price cut from Saudi maker shudders sentiment as it might undermine trader’s effort in lifting local prices.

Several regional players have brought up the discussion about difficulties suppliers might face if they want to achieve deals for LLDPE film above $1200/ton threshold this month. 

In Indonesia, a domestic producer ripped $55/ton from the latest HDPE film offers to local buyers today while other grades fell approximate $20/ton. A trader said, “Market started to tumble and the PE bear is taking over the situation now. Local demand is very weak since converters are not receiving sufficient end product orders.”

In the regional PP market, offers from international suppliers however remain largely stable. Despite the recent drop in propylene costs within Southeast Asia, there is almost no supplier raise intention to reduce prices is large range. On the demand side, resistance is building up as buyers are loosing confidence in near term outlook. An international supplier offers final prices for Saudi homo-PP at $1025/ton CIF Vietnam, LC AS term said, “Sales are very disappointed.” Vietnamese players, especially traders are not showing great interest in making fresh purchases amid piling domestic supply. One of the sources added, “Local market is weak now, but we believed if we can hold until January next year, we could make some margins. This is because very few cargoes arrive during that time as traders are not interested to accept current prices with the up-coming import duties rate.” 

There are also some discounts on import homo-PP from Middle East to Indonesia compared to last week as demand here is dimishing. A trader sold Saudi’s homo-PP at $1040/ton CIF Indonesia said, “We reduced offers by $15-20/ton from last week after a hard negotiation with customers. Domestic suppliers are cutting prices while local traders are offering well below price list levels. Market just got really tough here.”