Asia Daily PP and PE Overview 15 Feb 2017

In China, futures market nosedived during the final minutes of the trading day, putting many players in great confusion. LLDPE contract slipped to the maximum daily low limit, losing CNY500/ton ($76/ton) to reach CNY10015/ton ($1242/ton without VAT). PP contract plunged CNY311/ton ($45/ton) to close at CNY9210/ton ($1142/ton without VAT).

In domestic spot market, trading activities remain limited and traders only offer small discount of CNY50-100/ton ($7-15/ton) for all PE grades. Players commented that such drastic drop in futures trading is simply a correction since it has been transacted at much higher levels than spot market for sometime. “However, the outlook is full of uncertainties since buyer remain on the side-line instead of active replenishment as initially expected,” a trader commented. In fact, buyers are hoping to see further price reduction in the coming days after the large reduction in futures market.

Domestic LDPE film offers are reported at CNY11,200-11,700/ton ($1387-1454/ton without VAT) EXW China, cash term with a market source added, “We are not seeing opportunity to re-export LDPE film to other markets as prices will not be competitive given high costs.” Traders are seeing LDPE film as obviously weaker than other PE grades and local offers have been falling since market resume working after the Lunar New Year holidays. This condition might exacerbate if converters persist on the current condition, though any possible price adjustment might only limit to domestic ground, traders said.

In the PP sector, prices hold rather steady and there are news that few thousand tons of USA’s homo-PP cargoes purchased previously are now cancelled. A Shanghai based trader informed, “Due to the delay in shipment beyond customer’s acceptance, we have to cancel out the order with compensation to buyers. This is just a small part of the overall volume and there will still be cargoes arriving in the next one to two months.”     

In Southeast Asia, there are only few suppliers open new offer as the week proceeds though the firming trend remains in place. It is noticed that the pace of price increment in import homo-PP offers to Vietnam has slow down a little compared to previous week, however, the price acceptance ceiling is moving higher. At the moment, import homo-PP prices to Vietnam stand at the range $1145-1170/ton, CIF, LC AS term. Despite the upper end levels shown in earlier week has not repeated; the location gap with China is now at $60-80/ton, which explains to why Chinese traders are actively seeking opportunity to re-direct their available cargoes to Vietnam. Earlier this week, a deal for Middle Eastern homo-PP re-export from China to Vietnam was reported at $1145-1150/ton CIF, LC AS term. However, today, players informed of the available of 200 tons Saudi’s homo-PP cargoes re-export from China, concluded at $1155/ton with the same term. A Vietnamese buyers said, “Buyers reacted very fast and accepted to purchase the cargoes within ten minutes. Prompt cargoes are highly preferred at the moment as domestic ground is tight.”

In Indonesia, market is off for elections, yet couples of deal for Saudi’s homo-PP are reported at $1130/ton CIF Indonesia, LC AS term, which is $30/ton below the initial prices. This just reflected the difficulties international suppliers faced in achieving full hike target in this market amid competitive local material. A market source commented, “We have expected such discount as we think import prices are firming up too quickly while domestic cargoes are not catching up. Demand here is sill slow since end product businesses have yet to revive.”

In the regional PE market buyers are still showing little interest in the current high price, yet supply in the coming month might continue to tighten as couple of regional suppliers have reportedly reduce operation rate to gain more margins in ethylene trade. A Thailand producer said, “We have not announced new offers and March export allocation might be limited as well. HDPE film offers below the $1200/ton threshold are becoming very scarce.” Another trader in the country reported, “Our Taiwanese supplier insist on HDPE film cargoes at $1230/ton CIF Vietnam term. We are not able to accept such high prices at the moment, especially when Chinese buyers are very conservative about making replenishment.”

Meanwhile in Malaysia, small to medium size converters are witnessing rapid drop in end product order after the holidays, in which the need for re-stocking is also limited. “Couple of traders have slashed domestic LDPE film offers by MYR300/ton ($67/ton) due to dull buying interest. Despite the on going maintenance shutdown at one of major local PE plants, we are uncertain if new offers could firm up any further.”