Asia Daily PP and PE Overview 09 Feb 2017

In China, futures prices extended the weakening trend, settled at lower levels for the third consecutive sessions. May delivery contract for PP inched down CNY20/ton ($3/ton) to reach CNY9207/ton ($1145/ton without VAT) while LLDPE contract reached CNY10220/ton ($1271/ton without VAT), some CNY25/ton ($4/ton) dropped.

In domestic spot market, it is reported that demand for LLDPE film sees some clearer signs of improvement. Mulch film manufacturers in Northern area are ramping up operation rate and might reach 80-90 per cent capacity in the coming week compared to only 60 per cent before the holidays. A coal based PE producer said, “We are receiving better number of purchase inquiries and expect this condition to advance further in the coming week. The mulch film sector is at the peak now while converters are not having high inventories on hand, therefore buyers might not be able to postpone their purchases for too long.”

However, spot offers for LDPE film continue to journey south, shredding another CNY100/ton ($15/ton) from the previous trading day. Players are considering LDPE film as the weakest performing grade in term of demand in the coming days with a market source explain, “LDPE film prices were too high previously and many of our customers are cutting down on the usage and replace with other alternatives. Meanwhile, there are large quantity of Iranian cargoes arrive to the main port recently, which is expected to east local supply further.” Even with that, import offers hold very firm at the range $1360-1400/ton CFR China, LC 0-90 days term as traders could not afford selling below their costs at this time.

There are very limited transactions in the PP market though supply appears to be tight. Only couple of deals observed in the import market which traders purchased for futures trading purposes. Market trend might only become clearer in the coming week.

In Southeast Asia, suppliers continue to lift their offers or express their intention to increase prices claiming high feedstock costs and limited supply. However, the general sentiment is cooling down as buyers have replenished much of the needed quantity and now step to the side-line. This condition is most visible in Indonesia.

An Indonesian buyer purchased Saudi cargoes at $1100/ton CIF, added, “We are not able to accept prices at higher levels at the moment. Vietnamese buyers are very aggressive this week, which drive market up too quickly. We plan to procure some local cargoes to cover our production for April.” Domestic homo-PP offers currently stand at IDR16,400,000-16,800,000/ton ($1232-1260/ton) without VAT, FD Indonesia, cash term. Therefore, Southeast Asian material offered above the $1200/ton threshold to the country is facing difficulty to attract buying interest.

Meanwhile, an Indian producer is planning to open new offer to the region in the coming week and sell idea laid on the firming track. Source close to the producer informed, “The general supply in the region is rather tight and we only have a small quantity to offer in the coming week.” Another Southeast Asian maker has also raised intention to implement substantial hike on March delivery cargoes.

In the PE market, more re-export offers from China emerge in Vietnam, creating a great confusion amongst market players since demand in China started show signs of improvement. These cargoes include Middle Eastern, USA and Brazil origins, ranging between $1250-1265/ton CIF term for both HDPE film and LLDPE film. A buyer received the offer commented, “Market is moving higher, however we are unable to accept this level at the moment as domestic market is not catching up. We might elect to replenish LLDPE film cargoes from local ground for more competitive prices.” In fact, it does appear that Vietnamese buyers are keener to scout LDPE film and homo-PP cargoes at the moment as domestic availability for these grades are rather tight