Asia Daily PP and PE Overview 14 Dec 2016

In China, futures prices concluded on a mixed result today. May delivery contract for PP revived from the earlier losses to close at CNY171/ton ($25/ton) higher, touching CNY9792/ton ($1211/ton without VAT). LLDPE meanwhile, extended the weakening trend, cutting CNY80/ton ($12/ton) to reach CNY10345/ton ($1280/ton without VAT). This has narrowed the price gap between PP and LLDPE futures and sparked a little concern among market participants.

The PE market also shows weakness in the local ground with traders in southern area are slashing offers by CNY50-100/ton ($7-14/ton). Meanwhile, spot offers for PP continue to move north, adding another CNY100/ton ($14/ton) from the previous trading session thanks to stronger futures trade.

It is reported that demand for PP in both local and import market remain healthy, which attract a great number of new offers from overseas suppliers, including those are not regular here. “Both major Philippines PP producers are presence in the market this week, though offers for this origin are very firm. Vietnamese suppliers are also increasingly active in China this week as demand in Southeast Asia persistently sluggish,” a trader informed. On the other hand, local suppliers are either holding back on their cargoes or limiting the offered quantity due to expected higher prices ahead.

An international trader offered Saudi’s homo-PP at $1070/ton CFR China, LC 90 days term said, “Respond is good but not to the extent of overwhelming. Even with that, we think market could still move higher in the coming days. It is very likely that dutiable homo-PP cargoes would hit above the $1100/ton threshold, in our opinion.”

Looking at the PE sector, major Thailand maker claimed to have achieved satisfactory sales result after lifted their offers earlier this week. In addition, the producer is planning for further hike before the week ends. Other overseas makers have also expressed intention to increase their offers. An Indian producer said, “We are having some HDPE blow molding cargoes which we initially planned to maintain previous price levels. However, situation has change and we think offers should be above the $1100/ton threshold now.”  

The Southeast Asian market is responding very positively to the latest development in China, though only import offers for homo-PP are firming up quickly and visibly while PE remain mostly unchanged. Major Saudi Arabia producer lifted homo-PP prices to Vietnam $30/ton in the previous trading day, reaching $1050/ton CIF, LC AS term and reportedly sold out with minimal discount. A distributor source informed, “We sold out at only $5/ton discount to northern Vietnam customers. Most buyers in the southern area are not interested in the new prices. Anyway, our principle supplier has directed most of the quantity to China, leaving only small portion for Vietnam.”  

Indonesian buyers are also receiving higher offers for both dutiable and non-dutiable cargoes, however, players are constantly comparing with competitive domestic prices, which hurdle overseas supplier’s effort to achieve full hike target. An international trader offered Indian homo-PP to Indonesia at $1050/ton CIF term, which is $20/ton higher week on week basis, added, “Buyers are not very active, however with import homo-PP to China increases on a daily basis and we think this would keep Southeast Asian prices on the firming track too.” Attractive China market is drawing most of the homo-PP cargoes, which might create a risk of lacking availability for Southeast Asia in the near to medium term.

In the PE sector, regional buyers are awaiting January offers from international suppliers, which might be earlier than usual due to the Christmas and New Year holidays. Expectation regarding the outlook is mixed. One thing clear is that players are no longer expecting Middle Eastern LLDPE film to breach below the $1150/ton threshold. A Vietnamese trader informed, “Therefore, we have purchased some quantity last week. Domestic market is very weak and LLDPE film supply is ample. We could only lift local PP offers but not LLDPE film.”

The LDPE film market might also halt the downtrend as suppliers for regular origins claimed still able to achieve sales in China in the range $1300-1320/ton CFR. This could play an important roll in supporting PE market as a whole in addition to surging ethylene costs.

In related production status news, Saudi’s PetroRabigh failed to restart the PE plant this week after completed 20 days maintenance work since mid November. The plant consists of 250,000 tons/year HDPE unit and a 650,000 tons/year LLDPE unit. Source close to the company informed they would attempt to bring the plant online again this weekend; however this clearly affected January export allocation.