Asia Daily PP and PE Overview 21 Dec 2016

In China, as market expected, futures prices on Dalian Commodity Exchange started to regain some balance after plunging more than 9 per cent in the first two trading sessions of the week. May delivery PP contract inch up CNY16/ton ($2/ton) from yesterday to close at CNY9106/ton ($1120/ton without VAT). Meanwhile, LLDPE contract continue to edge lower, loosing another CNY40/ton ($6/ton) to reach CNY9865/ton ($1213/ton without VAT).

In domestic spot ground, buyers are returning to the market to make replenishment before entering the holiday seasons. Market is on bargain stage with traders offer up to CNY100/ton ($14/ton) discount on deals for both PP and PE. Since the week begins, local PP prices have reduced a total of CNY400/ton ($58/ton). A trader informed, “Our customers are not having high inventories thought they have received end product orders till early February. We believed that purchasing activities would remain healthy in the coming weeks.”

The Chinese government has earlier asked thousands of companies along the Yellow Sea coast, including Beijing, Tianjin, Shandong and Hebei to either shutdown or reduce operation rate to improve the air quality in these area. Polyolefin industry is moderately affected. Besides several (about 6) PP and PE plants in these areas have to shutdown following the government guidelines, a number of converters are also forced to suspend or cut operation rate till the air quality improve. Players said this has created a rather balance condition for supply and demand.

There are little movements in the import market; especially for homo-PP as suppliers refused to reduce prices to below the $1060/ton levels while buyers are turning back to the local market for more competitive prices.

On the other hand, a major Thailand producer last Friday lifted HDPE film to China to $1200/ton is now adjusting their offers down $20/ton due to stiff market resistance. A source close to the producer informed, “We are open to negotiation and willing to give additional discount for serious buyers. Other suppliers are still taking wait and see stance and we feel it is really difficult to increase prices at the moment.”

In Southeast Asia, market is getting calmer as the Christmas holidays draw near. More international suppliers announce fresh offers to the region at stable to firmer levels; however, buyers are not showing confidence in the longer term outlook, bidding for larger discount. Another major Saudi Arabia producer lifted PP and LLDPE film prices to Southeast Asia by $10/ton compared to last month to reach $1040/ton for homo-PP and $1190/ton for LLDPE film. A regional buyer informed, “It is unusual to see import homo-PP below the $1050/ton threshold at the moment. We plan to bid for at least $20/ton lower than initial offers considering weaker demand in China market.”  

Indonesian players also reported receiving higher offers for both dutiable and non-dutiable cargoes, yet buyers are not rushing to make replenishment. A distributor offered homo-PP on behalf of a Saudi Arabia producer at $1060/ton CIF Indonesia, LC AS term said, “Our supplier hold very firm on their cargoes, refused to give any discount. We are not able to conclude any deal.” A converter in the country added, “We are able to obtain domestic cargoes at $1170/ton FD Indonesia, cash term which is way more competitive than import material now. Market is very quiet and we think trading activities will be very limited in the coming week.”

The PE market is no more exciting than PP and regular origins cargoes are mostly concluded at stable level from last week. One interesting point is that HDPE film suppliers are taking firmer stance on their cargoes though some domestic markets within Southeast Asia are still facing persistent weak demand. Meanwhile, local Vietnamese traders reported seeing improving condition for HDPE film after an extended period of time being under pressure. A trader informed, “Local HDPE film prices are firming up due to limited availability here. Many traders did not make purchases previously. At the moment, only domestic LLDPE film prices are still unable to firm up due to ample supply.”

Malaysian converters are wrapping their purchases for the year. It is very likely that local prices here would continue to increase in the near term consider the recent depreciation of the Malaysian Ringgit. Besides, domestic producers claimed to have no inventory pressure after achieved satisfactory sales result in China during the past weeks.