Asia Daily PP and PE Overview 09 Dec 2016

In China, futures market rebounded on the final trading session of the week, gaining three digits from the previous trading day. Contract 1705 May delivery for PP added CNY212/ton ($31/ton) to reach CNY9449/ton ($1170/ton without VAT). LLDPE futures leaped CNY210/ton ($30/ton) to close at CNY10355/ton ($1283/ton without VAT).

Spot offers for both PP and PE in local market inched up CNY50-100/ton ($7-15/ton), which is too subtle compared to the hike recorded in futures trading. Demand in both local and import ground is healthy and suppliers claimed satisfactory number of deal concluded, mostly at firmer levels.

A trader sold 1000 tons of Indian homo-PP at $1050/ton CFR China, TT in advance term said, “Our cargoes are arriving soon, hence, we sell slightly higher than earlier this week. However, this is still CNY250/ton ($36/ton) lower than the concluded price on futures market today. Demand is very healthy and we think this is very likely to last in the near term.”

In local market, domestic producers are limiting sales quantity with expectation of achieving better margins in the coming week. A Ningbo based PP producer said, “We only allocate 500 tons of material to local market today and respond is very good. In fact, we sold out within ten minutes at CNY9050/ton ($1121/ton without VAT). We expect further price increment in the coming week.”

Import PE to the country also witness strong buying interest thanks to the resilient futures trading. Most cargoes at the lower end of the overall price range are attracting good number of deals. An international trader reported to have sold 3000 tons of Brazilian 800 tons of Indian PE this week said, “Most deals are below $1100/ton threshold. We believed the PE has reached the bottom, especially for HDPE and LLDPE film. Looking forward, it is less likely market can come down further if demand sustain the current state in the coming week.”        

In Southeast Asia, market remain calm on the final trading day of the week with buyers mostly withdraw to the side-line to monitor further development. Suppliers continue seeing bearish prospect in the near term for both PP and PE as the holiday season draw near and demand shows no signs of improvement. The expected positive spill-over effect from healthy buying interest in China has yet to emerge.

An international trader offered Saudi Arabia’s LLDPE film at $1160/ton CIF Vietnam, LC AS term informed, “Our principal supplier allocated extra quantity this week, however, respond from market is very poor. Our customers are receiving offers for prompt Saudi cargoes at similar levels, hence inquiries for deep-seas parcels are low.” Several domestic traders are cutting LLDPE film prices to speed up sales following the latest measures taken by international suppliers. However, this is still not a major trend in local ground as many others are still attempting to hold firm on their cargoes.

Meanwhile, more LDPE film offers emerged in Vietnam towards the end of the week, including irregular origins. Although most of the cargoes are offered above the $1300/ton threshold, it brings about concerns amongst buyers, who are now loosing confidence about the sustainability of the strong LDPE film trend. A buyer received Iranian LDPE film at $1240/ton CIF Vietnam said, “We plan to bid for $40/ton lower on deals as outlook is rather bearish. Ethylene costs are firmer, yet we are not confidence that this would withhold the strong trend in the downstream PE market.”

The regional PP market remains largely unchanged day on day basis and regional and overseas suppliers are not active in giving new offers. This could be due to healthier demand condition in China that attracted supplier’s attention. Within regional domestic market, buying interest again sink low. An Indonesian trader informed, “Converters are not willing to source from local market due to unattractive price levels. Import cargoes are much competitive now. In addition, many buyers refused to keep high inventories due to various reasons including weak end product business, unstable political condition and weak exchange rate. We think December would remain weak.”