Asia Daily PP and PE Overview 15 Dec 2016

In China, following the appreciation of the USD and softer energy market, futures prices come back to the red zone today. However, it is interesting that the drop in PP futures prices is rather subtle compared to LLDPE. May delivery contract settled at CNY16/ton ($2/ton) lower for PP, reaching CNY9719/ton ($1199/ton without VAT). On the other hand, LLDPE contract slashed another CNY130/ton ($19/ton), marking the third falling session in a row, to close at CNY10220/ton ($1260/ton without VAT).

In domestic market, purchasing activities are less aggressive as buyers are slowing down to gauge the possible impact of the strengthening US dollar on the futures trade direction. Spot offers for both PP and PE drop CNY50-100/ton ($7-14/ton) from the earlier day. Players reported demand for PP in local ground still hold better position than PE, especially from the BOPP sector, where converters are rushing orders before the Lunar new year holidays. In contrast the end of the agriculture season has badly affected the PE sentiment.

A trader in Linyi informed, “Only stretch film and HDPE bags converters are having stable orders, other than that, even mulch sheet makers are operating at very low rate. We offered some small discount to local buyers today and respond is just mediocre.”

In the import market, market participants think that the PP sector is reaching the peak and that room for further increment is rather limited. Buying interest for imported cargoes started to show signs of slowing down, especially toward offers at the upper end of the overall price range. A buyers added, “We were bidding Philippines homo-PP cargoes at $1140/ton CFR China yesterday but got rejected. And today we are not confident to make any purchases at same bid level considering the down side risk.” Yet, buyers are not expecting any significant reduction and if there were any adjustment, players said, the upper end of the overall prices range would be under pressure.     

In Southeast Asia, market sentiment does not pick up significantly towards the end of the week. However, buyers are cautiously accepting higher homo-PP offers from overseas suppliers, believing that market might remain firm into 2017. An Indonesian buyer purchased Saudi’s homo-PP at $1035/ton in the earlier trading day commented, “Most suppliers are not facing sales pressure which means even with a slow down in China, we do not think prices would slip significantly in the near term. Market might hold firm into 2017.”

Several traders in Vietnam are also planning to make replenishment if can obtain reasonable discounts as market prospect brightened. Local homo-PP prices has surged to VND27,500,00/ton ($1100/ton without VAT) today and might continue to firm up in the near term. A market source informed, “Market is digesting the supply and with the support from international ground, we think domestic prices are heading north.”

Meanwhile, a good portion of Southeast Asian buyers is taking more cautious stance, as the two weeks price rally in China appears to be taking breather. “We think China market is reaching the peak and we decided to adopt wait and see stance. The US dollar is strengthening and it is very difficult for local converters like us,” a PP yarn manufacture commented.

Within the regional PE market, there are very limited numbers of new offer observed as the week ending. However, with ethylene costs surge to multi-months high, market outlook is locked on the stable to firmer trend. A regional buyer who is active is dealing with LDPE film said; “It is too risky to accept prices above the $1300/ton threshold as demand normally slower after the Lunar New Year. On the other hand, our Malaysian supplier does not seem having pressure given the planned shutdown in January. We think we would have to continue purchasing in small quantity this month.”