Asia Daily PP and PE Overview 08 Dec 2016

In China, futures prices are slowing down after three continuous rallying sessions that pushed May delivery contract for PP up CNY1006/ton ($146/ton) and LLDPE up CNY765/ton ($111/ton). Today, PP futures only added CNY39/ton ($6/ton), which is too subtle for many players. LLDPE meanwhile softened CNY20/ton ($3/ton). Both contracts closed at CNY9266/ton ($1151/ton without VAT) and CNY10180/ton ($1265/ton without VAT) respectively.

The arbitrage window between futures and spot market is now narrower, and traders are less aggressive in scouting for material. However, domestic producers are facing very little sales pressure to reduce prices after depleted more than 100,000 tons of inventories in the first three trading days of the week, private data showed. Besides, it is reported that converters, especially in BOPP film sector have been able to transfer the recent hike in raw material prices to end product while having good number of orders. A trader commented, “Trading activities are slower today, yet we remain optimistic about the outlook for the remaining of December.”

Import prices to the country remain on the stable to firmer levels with Thai producer again up adjusted their PE offers by $10-30/ton from yesterday. This takes place just a day after the maker slashed their prices up to $60/ton, resulted in surprisingly good sales. Improved demand condition in China has attracted many regional and international suppliers to focus on selling to this market for better margins. In fact, players reported seeing more Vietnamese homo-PP cargoes this week at the range $1090-1120/ton CFR China, LC AS term.

In Southeast Asia, market is quieter than the previous trading session on the lack of new offers from international suppliers. Couple of major makers decided to withdraw their prices after achieving the desired number of deals. In fact, a Thai major suspended their HDPE offers to Vietnam today, just a day after announcing new offers with reduction. A source close the to company informed, “We managed to conclude a good number of deals just in one day without any discount. We plan to monitor further development before re-opening new prices.”

Domestic Vietnam market shares similar situation, in which demand is exceptionally calm, yet domestic traders are not in a good position to reduce prices given the lose they bear for the weakening local currencies. A Vietnamese trader informed, “We suspended our local offers too, as there is no new inquiries from regular customers. We are very disappointed with the current state of demand and we could not understand what happens to Lunar New Year orders.”

Local Indonesia is better. Buyers have accepted to make new purchases at lower end prices believing that room for further reduction is limited. However, this does not heat up the sentiment significantly.

Southeast Asian PP market holds a better position compared to PE in term of prices, however, it still trails behind China in term of buying interest. And for this, regional suppliers are diverting their attention to China. An Indonesian buyer informed, “Our Vietnamese supplier is having very limited homo-PP quantity for us this week claiming better netback selling to China. We therefore agreed to purchase the available cargoes at higher level compared to last week.”   

Meanwhile, international suppliers are also attempting to increase their offers slightly to Vietnam, in line with the stronger demand in the neighboring China market. A converter in Vietnam received USA homo-PP at $1000/ton CIF, LC AS term said, “This is $20/ton higher than last week; however we are not interested. We are fully covered until end of February, therefore we are in no rush to make replenishment.”