Asia Daily PP and PE Overview 02 Mar 2017

In China, futures market sees little improvement with May delivery contract for PP continue to edge CNY24/ton ($3/ton) lower, settled at CNY8591/ton ($1067/ton without VAT). LLDPE contract, however, regain some stability, gained CNY5/ton ($1/ton) from the previous session to reach CNY9625/ton ($1196/ton without VAT).

Sentiment in local market remains flat with very few numbers of transactions reported. Domestic suppliers continue to cut offers for both PP and PE by CNY50-100/ton ($7-15/ton) after only two sessions of holding stable. Market appears to be under tremendous pressure as inventories are hovering at high levels while depressing futures trading hampered buyer’s confidence. Earlier this week, a number of players expressed expectation that local ground might be hitting the bottom as the bear has been running for too long. However, at the moment, players are holding much into bearish views.

In the import market, more cargoes purchased previously at lower costs are arriving, adding even more pressure on the market. A trader offered USA homo-PP at $1040/ton and Indian LLDPE film at $1160/ton CFR China term said, “These cargoes are prompt and normally would attract good buying interest. This time, however, respond is very disappointed though our offers are below market levels. Our customers are not showing any concern about tightening supply from international suppliers given comfortable availability in local ground.”

In Southeast Asia, there are very limited number of transaction reported toward the end of the week and buyers remain conservative about the making fresh replenishment. Re-export homo-PP materials from China are moving intensely to Indonesia as demand in the previous destination – Vietnam is waning. Origin available including Saudi Arabia, Russia, USA an India priced at the range $1130-1150/ton CIF Indonesia, LC AS term. A buyer commented, “Non-dutiable cargoes are also offered lower this week and we think that market still has room for further downward adjustment. More re-export cargoes emerged in Indonesia means that demand in other major regional markets is weakening. We prefer to hold conservative stance in the coming days.”

Meanwhile, market is moving contradicting in Vietnam with a major Saudi Arabia producer announced fresh weekly prices at $30-40/ton lower than last week, reaching $1150/ton CIF Vietnam and a distributor is reportedly collecting bids for the cargo at $1130/ton level. On the other hand, another Saudi producer insist on March delivery shipment priced at $1170/ton CIF Vietnam, with a distributor informed, “Our principal supplier claimed to have achieved better margins in Turkey market, therefore refused to commit to any discounts for both PP and PE to China and Southeast Asia.  Vietnamese customers are not interested in such high prices.”

Propylene cost based on FOB Korea term continue to retreat from multi months high, slashing $85/ton in the span of two weeks on sluggish demand condition in the downstream PP market. Market participants are expecting the propylene market to stabilize in the near term as supply curtailed due to heavy maintenance shutdown in the region. Yet, whether or not the market could rebound, it very much depends on the pick up pace in demand condition in the PP sector.

In the regional PE market, after several suppliers stepped back on their hike target earlier this week, most other suppliers are holding their prices rather stable. However, buyers are not confident about the near term outlook claiming the lack of end product orders would hurdle any seller’s effort to up-adjust their offers again.

In the regional local market, Indonesian players reported tight LLDPE and HDPE film supply stemming from domestic production issues. A market source commented, “Yet, it is very difficult to increase prices amid strong buyer resistance. We think supply-demand dynamic is rather balance at the moment.”