Asia Daily PP and PE Overview 01 Dec 2016

In China, futures prices on Dalian Commodity Exchange made a come back after the energy market rebounded. May delivery contract increased CNY126/ton ($18/ton) for PP to settle at CNY8330/ton ($1033/ton without VAT). Meanwhile, same contract for LLDPE inched CNY65/ton ($9/ton) higher to reach CNY9375/ton ($1163/ton without VAT).

Domestic traders reported better sentiment in local ground, in which most PP deals are closed at CNY50/ton ($7/ton) higher than yesterday. However, buyers are not accepting anything above the CNY50/ton hike. Meanwhile, PE prices continue to turn south, reducing CNY50-100/ton ($7-15/ton). The LDPE film were the best performing grade in term prices in the past three months, is now the worst among the PE cargoes, players said. A coal based PE producer in Northern China informed, “We have sold out most of our spot allocation for this week, except LDPE film. Buyers are very reluctant to replenish material despite having low inventory on hand. Local LDPE film prices might breach below the CNY10000/ton ($1240/ton without VAT) mark soon and it means outlook is really bearish.”

In the import ground, beside the support from stronger energy market, it is reported that USA suppliers have suspended offers for homo-PP claiming out of allocation. An international trader added, “We have sold out most of our quantity at $960-980/ton CFR China levels. At the moment we are focusing on delivery of the cargoes to buyers.” Market therefore might be able to catch a breath after two weeks of intense competition that drive prices lower.

In contrast, USA’s PE materials are still ample in the market at very competitive prices. A trader offered 2000 tons of these cargoes at $1070/ton for LLDPE film and $1060/ton for HDPE film, CFR China, LC 90 days term. The source commented, “Buyers are showing more interest in HDPE parcels recently, other than that, demand for import cargoes are a little weaker than expected.”

In Southeast Asia, the general sentiment witnessed some positive effects of the recent output deal amongst major oil producers that pushed international oil prices up nearly 10% in a single trading day. Regional players reported better trading activities compared to earlier this week, however, attempts to increase prices yields disappointed outcome.

A Vietnamese trader said, “Our customers started to send in inquiries and we tried to increase our offers by VND100,000-200,000/ton ($4-9/ton). However, most buyers insisted to make purchases at the previous price levels. Despite the surging energy market, we are not confident about the near term outlook; hence we plan to deplete remaining cargoes before the holiday season started.”    

Similar situation in observed in the near-by Indonesia market, just one thing difference is that buyers here are taking calmer respond toward the surging energy values. A market source said, “Our main concern is still the depreciation of the Indonesian rupiah. Middle Eastern homo-PP at $1000/ton CIF Indonesia appears to be competitive now; however, the exchange rate might hurt our margins when the cargoes arrive.” However, couple of international suppliers claimed to have concluded moderate number of deals for Middle Eastern homo-PP at $‎1000-1030/ton in Indonesia based on CIF term.

The regional PE market appears to be weaker than PP. Except LDPE film still hold firm with the support from limited availability, other film grades including LLDPE and HDPE film are seeing adjustment. However, a positive sight is that buyers actually accepted the price adjustment. A Thailand producer sold HDPE film at $1120/ton CIF Vietnam, LC AS term, some $15/ton lower than price list. A source close to the company said, “We have sold out the available quantity and stopped taking additional orders today. Our customers seem more enthusiastic about making enquiries after seeing the latest development in the energy market. Looking ahead, we might up-adjust our prices given the satisfactory sales result this time.” The source added that though there are more movements observed today, the extent of any possible price increment would remain limited considering the availability of competitive USA cargoes.