Asia Daily PP and PE Overview 13 Dec 2016

In China, futures market flipped to the red zone today with May delivery contract for PP settled at CNY41/ton ($6/ton) lower while LLDPE contract slipped CNY70/ton ($10/ton) from yesterday. Both contract closed at CNY9670/ton ($1198/ton without VAT) and CNY10450/ton ($1294/ton without VAT respectively).

Domestic spot market however still rising with offers from local makers for both PP and PE added another CNY50-100/ton ($7-15/ton). Players believed that today’s reduction in futures trading is just a minor movement after nearly two week of rally and it should not impact spot market drastically given the lack of sale pressure at seller’s side. On the other hand, it is worth noting that most cargoes takers these two weeks are still traders. Actual demand from converters remains mediocre despite better number of end product orders, as weakening local currency and surging raw material prices crush profit margins.

In the import market, ready Saudi’s homo-PP cargoes are offered at $1100/ton, LC 90 days term. Prices below the $1050/ton threshold have technically disappeared from the market. Once again, import homo-PP to China is traded at premium over Southeast Asia region. A trader added, “Couple of Southeast Asian suppliers become more active in China this week though their offers are very firm.”

In the PE market, traders believed that prices have hit the floor and now is the bounce back time. In fact, deep-seas cargoes – the culprit for the softening trend observed in the past one month are mostly sold out. Traders are leveraging the current futures and energy trend to maximise profit. A trader offers USA’s LLDPE film at $1130/ton CFR China, LC 90 days term informed, “We lifted prices by $30-50/ton from the previous weeks. Our USA suppliers claimed to have sold out available quantity and most offers in the market at the moment are from traders.” The source added that they achieve good number of deals at only $10/ton discount today.

In Southeast Asia, market starts seeing more movement with a number of international suppliers open new prices to the region. Most new offers stand at stable to firmer levels compared to last week, yet buying interest remain subdue.

A Saudi Arabia producer lifted homo-PP prices to Vietnam by $30/ton compared to initial offers given during late November, reaching $1050/ton CIF Vietnam, LC AS term. A buyer said, “In addition to the increases in import duties, prices would be too high. We plan to bid at $1020/ton to replenish 100 tons. At the moment we are waiting for the supplier’s respond.” It appears that Vietnamese buyers are still having low confidence in near term outlook, hence very reluctant to make large purchases at higher prices.

Meanwhile in Indonesia, major domestic producer slashed local homo-PP prices by approximate $30/ton from last week regardless of firming international trend. Market sources commented that such move aimed to stimulate buying interest and strengthen the competiveness against the distribution market. A buyer in the country added, “Traders are still offering at much lower levels while demand is weakening ahead of the holidays season. We think stronger buying interest in China and firmer stance from overseas supplier would only prevent local prices from further declining and attempt to lift prices might not yield fruitful result at the moment.”

In the PE market, several suppliers have indicated higher offer levels from previous week while others are maintaining firm stance on their cargoes. Sentiment and buying activities have yet to improve significantly following the latest development in the nearby China market, however, regional buyers are generally looking at very small possibility of further reduction considering the upstream costs. A Vietnamese buyer purchased Saudi’s LLDPE film at $1150/ton CIF, LC AS term informed, “Our supplier has sold out the available quantity and stop taking new orders. We think import PE to Vietnam has reached to bottom too; just local market might need more time to catch up.”