Asia Daily PP PE Report 25 Feb 2016

In China, futures prices on Dalian Commodity Exchange firm up today with contract number 1605 for PP climbed CNY123/t ($19/t) to reach CNY6541/t ($856/t without VAT) while LLDPE futures increased CNY70/t ($11/t) to CNY8925/t ($1168/t without VAT).  

Firming futures trade has encouraged traders to adjust spot local offers for both PP and PE up and in fact, domestic PP parcels are open at CNY50-70/t ($8-11/t) higher than yesterday while PE cargoes are reported at CNY50/t ($8/t) gain. “We have more confidence to increase prices for our homo-PP cargoes today. However, we find it very difficult to conclude deals in the face of sluggish demand. We expect to see some small magnitude price fluctuation in the near term before buyers completely return to market,” a trader from Zhejiang said.

Players are reporting that Chinese converters are struggling in getting production rate back to normal due to high non-show up rate of workers after the holidays. This issue might take a while longer to be settled from which buyers could switch their attention to make replenishment. At the same time, a trader in Linyi commented, “We continue to hear warehouse notices of out of storing space and import cargoes are arriving. This is creating a lot of pressure for traders and stockist if demand does not return soon. Market might not see any improvement until next month.”

In Southeast Asia, both PP and PE markets remain on the stable to firm trend with the support from tight supply. Players active in PE trading informed that a Middle Eastern and Taiwanese producer have lifted their offers by additional $10-20/t for LLDPE film cargoes compared to the beginning of

the week on the back of limited allocation. A buyer received Taiwanese LLDPE film at $1145/t CIF Vietnam, LC AS term said, “We have yet to decide on our purchases, as we see local market has not picked up as fast as import offers. There will be a number Saudi Arabia cargoes purchased previously at lower cost arrive by beginning of next month, hence we are a bit concern about the near term outlook in domestic trading.” Neither traders in Indonesia are satisfied with the current domestic PE market condition with one of the sources commented, “PE trading is apparently weaker than PP and we hope that firming international trend will support local prices in the near term.” However, PE demand in Indonesia might be shackled in the near term after the government proposed a guideline on plastic bags levies, which forced plastic bag manufacturers to curb production in anticipation of lower end product demand. A market alert on this issue was reported on 23 Feb 2016.

In the PP market, a major Southeast Asian producer announced new offers for March shipment with $50/t increased for PP cargoes compared to last month. A distributor said, “Our principal has very limited quantity of PP this month due to lack of propylene supply. Besides, the producer will be having a major maintenance shutdown in July at the PP plant, hence they are totally free from sales pressure.” In the local market, Indonesian players described the current domestic PP supply condition as “shortage” which is expected to last until March. A converter informed, “Spot cargoes are very hard to find now and major domestic producer has delayed their delivery for at least two weeks. We do not think this situation will improve in the next couple of week, and therefore, PP prices might continue to gain.”

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