Asia Daily PP and PE Overview 29 Nov 2016

In China, futures prices followed mixed direction today as LLDPE inched CNY45 ($7/ton) higher moving toward the May delivery contract. PP however, slashed CNY115/ton ($17/ton) on risk selling. Both contract settled at CNY9540/ton ($1183/ton without VAT) for LLDPE and CNY8361/ton ($1037/ton without VAT) for PP.

Domestic spot market witnessed CNY50-100/ton ($7-15/ton) reduction on both PP and PE cargoes though it is reported that the number of deals concluded are fewer. Players are waiting for major domestic makers – Sinopec and CNPC to announce December price list before making additional purchases. Even the local LDPE film market is loosing its momentum, with prices are falling below the CNY12000/ton ($1489/ton without VAT). “With more cargoes arriving in the coming weeks to ease the supply tightness condition, we expect LDPE film prices to extend the softening trend in the near term,” a trader from Xiamen said.

In the import market, overseas suppliers started to implement price cut on their cargoes facing stiff competition from low cost USA parcels. In fact, import homo-PP from USA is moving deeper below the $1000/ton threshold, concluding at $960/ton CFR China, LC 90 days term. A trader purchased 2,000 tons of the material said, “We managed to obtain additional discount after a long negotiation. Our supplier informed that they have left not much quantity by now, and though it is trader’s packing, we feel this is very competitive levels.” And for this, Saudi homo-PP also sees $30-50/ton reduction compared to last week to close deal at $1000/ton CFR China, LC 60 days term.

Besides, import LDPE film from the USA also fall $50/ton from earlier November, touching $1200/ton CFR China term. A trader in Shanghai offered the material said, “Our customers are asking for additional discounts and we are still in mid of negotiation process.” If deals are formed in this new level, pressure on other LDPE film origins might be inevitable, market sources said.        

In Southeast Asia, market started to show some movement after major Middle Eastern producer down adjusted their homo-PP offers, concluding deals at $1000/ton CIF Vietnam, LC AS term, some $40/ton lower than the previous initial prices. It is reported that the supplier sold out 2,000 tons of material shortly after the price adjustment. A buyer purchased 100 tons of the material commented, “We placed bid at $990/ton, however our supplier refused to accept. We plan to make purchases gradually since it appears that that downtrend has just begun.”

Couple of other Middle Eastern producers have also reduced their offers slightly compared to last week, while USA homo-PP injection emerged in Vietnam at $980/ton CIF, LC 90 days term. A trader received the offer said, “Despite the fact that this is an irregular cargo, we think the impact on the general sentiment is till significant. We have not made any replenishment in the past two months, and might consider fresh buy in the coming week.”

Demand for PP in Indonesia has not shown much improvement and in fact, both international and local suppliers have voiced intention to adjust their prices in line with the latest development in regional ground. Players expected the current sluggish buying interest to persist until Lunar New Year before the traditional high demand season start in March.

In the regional PE market, most suppliers are still holding very firm on their offers pointing to the lack of sales pressure. The tug-of-war is getting intense in Southeast Asia. There are some small price adjustments reported on Middle Eastern PE cargoes to Vietnam, yet, the range is not attractive enough to draw healthy number of deal. A major Saudi Arabia maker re-open HDPE film and LLDPE film prices to the country at $10/ton lower than initial prices last week, an a buyer commented, “We think demand is too weak to accept such high prices at the moment. Other Middle Eastern producers are offering LLDPE film below the $1200/ton threshold, and we decided not to make any replenishment this time.”

Ethylene cost based on CFR Southeast Asia has fallen to the lowest levels seen since mid February this year on ample supply and this might downplay suppliers’ effort in maintaining firm stance on their available cargoes. On the other hand, there is a location gap in ethylene prices of about $140/ton between the Northeast and Southeast Asia region, opening the arbitrage opportunity window, and if successful, downward pressure on Southeast Asian ethylene market might be moderated.