Asia Daily PP and PE Overview 30 Nov 2016

In China, futures prices continue to fall, slashing three digits in values from the previous trading session. PP contract loss CNY238/ton ($35/ton) to close at CNY8187/ton ($1017/ton without VAT). LLDPE contract down CNY140/ton ($20/ton) to reach CNY9380/ton ($1165/ton without VAT).

Domestic spot market sees little movement from yesterday, as it is the final trading day of the month; players are awaiting Sinopec and CNPC to announce fresh prices. While traders are holding hope for a less drastic price cut from local makers pointing to the low inventories pressure; converters show more willingness to wait for further adjustment before making larger purchases. “If futures market respond positively to the energy market, traders might face less downward pressure in the near term,” a trader commented.

Meanwhile, situation in the import ground is a little depressing since the Chinese Yuan fell to multi years low has affected buying interest for imported material. Several PE traders are offering $30-40/ton below official price lists from overseas producers, causing even more confusion in the market. Buyers reported to have received Qatari LLDPE film and LDPE film offers from distribution market at $1120/ton and $1310/ton respectively, some $30/ton below initial prices earlier this week. The LLDPE film cargoes are immediately taken for re-export to near-by Southeast Asia market. Material from Saudi Arabia and UAE are facing similar situation today, players informed.

Import PP hold steady from the previous trading session, and despite the weak demand and pressure from the USA cargoes, Middle Eastern producers are not willing to move below the $1000/ton threshold. Hope is now focus on the energy market.  

In Southeast Asia, more Middle Eastern producer agreed to down adjusted their prices from the official offers in the face of sluggish buying interest, and buyers have gradually accepted. It is reported that a Saudi Arabia maker stepped back on their PP and PE prices to Vietnam by $20-30/ton compared to last week to reach $1000/ton for homo-PP, $1110/ton for HDPE film and $1160/ton for LLDPE film, all based on CIF Vietnam, LC AS term. A distributor offered on behalf of the producer informed, “We managed to sell some quantity of PE cargoes at the new levels. However, Our principal supplier is not allocating much homo-PP to Vietnam, as more priorities are given to China.”

It appears that PE prices at the upper end of the overall prices range are not attracting enough buying attention. Meanwhile, it is interesting that re-export Middle Eastern LLDPE film from China emerge in Vietnam again today at the level $1170/ton CIF Vietnam term. A buyer received the offer informed, “This is a prompt cargo. We might negotiate with our supplier for further discount as Chinese buyers seem loss their buying appetite now.”

On the other hand, late news about the OPEC’s preliminary agreement to cut production output by 1.2 million barrels that send energy prices skyrocket have casted some positive impact on the general market sentiment. Regional players say that though there are still no details on the implementation procedure of the output cut; this would encourage petrochemical suppliers to take more conservative step in reducing their prices.

In the PP market, the general expectation is that prices might extend the weakening trend in the coming days, yet the range of reduction might be limited considering the current propylene costs in Fareast Asia region. A number of buyers have expressed their intention to make small purchases of Middle Eastern homo-PP at the level $1000/ton CIF, LC AS term after seeing the latest development in the energy market. A regional buyer said, “The down trend might be really slow this time. We did not plan to make any replenishment at this price level initially; however, with news from the energy market, we are re-considering our plan.” Market might become more dynamic in the following trading session as a respond to surging energy values.