Asia Daily PP and PE Overview 17 Feb 2017

In China, Dalian Commodity Exchange continues to move lower on the final trading day of the week, marking three consecutive falling sessions, which accounted for a total drop of $130/ton in PP and $170/ton in LLDPE contract. Today, PP futures settled at CNY207/ton ($30/ton) lower, touching CNY8921/ton ($1110/ton without VAT). LLDPE contract closed at CNY9885/ton ($1230/ton without VAT), some CNY195/ton ($28/ton) lower.

In domestic spot market, PP prices drop another CNY100/ton ($15/ton) from yesterday while LLDPE and LDPE film offers are CNY100-200/ton ($15-29/ton) lower. Buyers are gradually coming back to make replenishment, although most transaction are still based on need basis. A trader in Guangxi said, “Customers are more comfortable with the current prices, therefore we managed to conclude several deals today. We hope demand would improve further in the coming week.”

Continuous softening local prices, however putting pressure on import cargoes and in addition to the storage issues reported earlier, traders started giving discounts on import material. While there are no reductions for Middle Easter’s homo-PP reported, USA PP cargoes are traded at $1050/ton CFR China, LC 90 days term, which is about $10/ton lower than last week.

Looking at PE market, HDPE offers hold relatively stable compared to other PE film grades and in fact, both LLDPE and LDPE film are seeing come adjustments. A traders slashed price for Middle Eastern LDPE film by $55/ton compared to last week to close deal at $1300/ton CFR China, LC AS term. The source added, “We have been holding firm on our cargoes for two weeks given lack of supply from international suppliers and strong upstream costs; yet unable to conclude any deals. LDPE film supply in domestic market might be eased in the coming days with the recent cargoes arrivals.”

Despite some discounts observed, it is believed that spot market traders would not commit to large price cut considering the current international supply condition and the upstream cots; but merely checking buyer’s respond to the discounts.

In Southeast Asia, market posted a strange sense of quietness though re-export cargoes from China continue to show up in Vietnam. Buyers are seems to pull brake on their purchasing activities despite a surge in propylene costs. In fact, propylene based on FOB Korea term jumped more than $60/ton on Thursday, to reach $1000/ton – the level market has not seen since early May 2015, according to CommoPlast data.  

A Vietnamese buyers commented, “We are aware of the possible tightening supply in the coming week, however, the current demand condition in China is really alarming. We have purchased some re-export cargoes earlier this week and decided to monitor further development. There is so much on uncertainties to watch out for in the coming week.”

In spite of such lack of confidence, when asked if players think import homo-PP to the region is reaching the peak, many expect otherwise. A regional buyer commented, “The upstream market has just put another step for PP prices to move higher. Yet, market is just waiting for demand in China to come back. At least until March, we are not expecting any major price reduction.”   

There are very limited movement in the PE market as major international suppliers might only open fresh offers in the coming week. Buyers are no less cautious than in PP market. A major Thailand producer maintain HDPE blow moulding to Vietnam at $1225/ton CIF, LC AS term informed, “Buyers are not responding very positively to our cargoes despite the available quantity is very limited. Even in March, our allocation might be tight as we are seeking higher margins in the ethylene market at the moment.”

Another buyer added, “Our Saudi Arabia producer is planning to announce March shipment offers next Monday. We were informed that the allocation is very small and prices might increase significantly compared to last month. It appears that most suppliers are holding strong on the firming trend, however, we might not be able to accept such large hike at the moment given weak buying interest in local ground.”