Asia Daily PP and PE Overview 20 Dec 2016

In China, PP futures again plunged nearly 5 per cent from the earlier trading day, marking the second consecutive session of falling, and erase 60 per cent ($128/ton) of the gains PP futures accumulated since early December. May delivery contract for PP loss CNY403/ton ($58/ton) to reach CNY9037/ton ($1111/ton without VAT). LLDPE futures slashed another CNY275/ton ($40/ton) to close at CNY9845/ton ($1211/ton without VAT).

Domestic spot offer for PP fell as much as CNY200/ton ($29/ton) from yesterday due to tremendous pressure from the futures ground. Meanwhile, traders are also cutting PE prices in the range of CNY50-150/ton ($7-22/ton); however, buyers are pressing on chances of further reduction.

A trader commented, “The futures market has overheated previously and it is time for correction. Prices have come down significantly these two days, therefore we think the range of reduction would be smaller in the coming days. For spot market, we do expect to see a pick up in purchasing activities in the near term, ahead of the Lunar New Year holidays.”

Falling futures prices caused very thin trading activities in the import ground. Buyers are not showing interest even with Saudi’s homo-PP at $1060/ton CFR level. A trader said, “We couldn’t close any deals these two days.” Players are saying that if futures and local prices continue to decrease in the near term, import market might need to match the trend to attract buyers.

In the PE sector, it is reported that more cargoes are arriving the main port this week amid slower demand. Players are loosing confident about the near term outlook though most international suppliers still hold firm on their cargoes to monitor further movement before taking further decision.

In Southeast Asia, buyers are in middle of negotiation for January delivery cargoes with hope to achieve reasonable discount before taking off for the holidays. Several Saudi’s LLDPE film deals are reported in Vietnam at $30-40/ton below initial offers while buyers here are not very eager to make large purchases. A buyer purchased the cargoes at $1170/ton CIF Vietnam, LC AS term commented, “Our suppliers are not having large quantity this month, and we decided to take minimum quantity partially due to comfortable inventories on hand. Besides, LLDPE film remains the worst performing grades in term of sales in local market and this condition might not improve in the near term.”

Another factor that discourages buyers from sourcing large quantity at the upper end prices is the availability of irregular origin at competitive price levels. In fact, deep seas cargoes including Brazilian and Nigerian LLDPE film parcels are standing below the $1150/ton threshold at the moment, holding market from advancing despite firmer ethylene costs.

Looking at the upstream market, the firming trend in ethylene prices seems loosing momentum on weaker demand from downstream derivatives such as PVC, styrene monomer and PE. However, industry experts believed that tightening supply due to several major shutdowns in the region during Q1 2017 would keep market on the stable to firmer track.

While couple of import homo-PP deals were reported in the earlier days at higher levels, it appears that the PP market is facing limitation to advance swifter. Regional buyers are mostly showing stronger preference for local material at the moment. An Indonesian buyer received homo-PP from Australian and Thailand supplier at $1180/ton and $1200/ton respectively. The source said, “We are still sourcing in local market as prices are more competitive. However, we think it is just the matter of time that domestic suppliers would increase their offers, following the international trend. We heard a major local trader is now running low on inventory.” 

Meanwhile in Vietnam, local homo-PP prices continue to move higher from beginning of the week, reaching VND28,000,000ton ($1118/ton without VAT) FD Vietnam, cash term. Players are raising concern over the state of local supply after the Lunar New Year with less than usual number of cargoes purchased in the recent weeks.