Asia Daily PP and PE Overview 25 Jan 2017

In China, futures market swing to the positive side again today with May delivery contract for PP jumped CNY258/ton ($38/ton) from the previous session to reach CNY9418/ton ($1170/ton without VAT). LLDPE futures firmed up in a smaller range of CNY150/ton ($22/ton) to close at CNY10405/ton ($1293/ton without VAT).

There are no more offers in the domestic spot market as majority of players are off for holiday now. Despite the fact that PP futures surges towards the final trading days before Lunar New Year, widening the price gap between futures and spot market by approximate CNY400-500/ton ($58-73/ton); yet deals in spot market is rather scarce in the absence of buyers.

At the moment, several traders are discussing the market prospect for the first half of February with most concerning about the state of demand as converters might fully return to the market only after the Chap Goh Mei festival. That would make the period right after Lunar New Year holiday bearish with accumulated local supply and weak demand. “There is a possibility of discount on domestic parcels during the first half of February; however, we are not looking at any significant price swing considering the state of supply from international sellers.”

It is reported that local LLDPE film in China is a little tight compared to usual market condition given several coal based plants have switch to produce more specialty than commodity film grade. A market source said, “The agriculture mulch film season is showing signs of improvement and in addition to the lack of cargoes availability in both domestic and import market, we think LLDPE film is posing for bullish trend.”

As reported previously, several Chinese distributors informed about major Singaporean producer’s intention to suspend LLDPE C4 production starting January 2017 to focus on metallocene grade. Would the producer carry out its plan, the impact on LLDPE supply to China could be tremendous, as Singapore has been topping the list of largest LLDPE exporter to China in the past few years (though the undifferentiated HS code did not allow us to sort out the proportion of C4 film and metallocene grades.” A distributor source added, “The producer might only resume LLDPE C4 film production by second half of this year. Therefore, we do expect import arrival for this grade to be less than usual in the coming months.”      

Sentiment in Southeast Asia is also weakening as the holidays approaching near. There are apparently no more offers in Vietnam, both domestic and local ground though a major Saudi Arabia producer lifted PE offers to the country and neighbouring markets earlier this week has yet to confirm conclusion prices for their cargoes. A distributor said, “We are still waiting for confirmation from the principal supplier, however, customers are already off for holiday while local banks are also stop processing transactions.”

The shutdown at four major LDPE plants namely Qapco, Formosa, Lotte Chemical Titan and PTT Thailand is expected to keep supply limited in the near term, and in addition to firming ethylene costs, suppliers might see no pressure to cut their offers. The spill-over effect to other PE film grade seem inevitable.  

The import PP market is also seeing limited movement with players placing heavy bids on continued firming trend in the near term, pointing to a series of regional and international plants shutdown. Buyers show intention to make purchases and actively seeking for discounts.

In regional local market, traders in Indonesia lifted homo-PP prices by $20-30/ton compared to last week to reach $1210-1230/ton for yarn and $1250-1260/ton for injection, FD Indonesia, cash term. A convert purchased the cargoes at $1215/ton FD Indonesia, cash term said, “We are not having many choices at the moment as even overseas suppliers are not very active in giving new offers. The shutdown at one of the major domestic PP plant might deprive the supply condition further in the near term.”

Local homo-PP prices in Malaysia also jumped MYR230/ton ($52/ton) on new monthly price announcement from a major domestic maker. This comes as a surprise to many buyers, who were initially called for stable trend considering steady currency exchange rate. “Our supplier claimed lacking cargoes due to the up-coming plant shutdown in February. This has seriously hurt our profit margins and we plan to only purchase minimum quantity.”