Asia Daily PP and PE Overview 06 Mar 2017

In China, futures market makes a sound come back after nearly two weeks of continuous softening that cast tremendous pressure on the spot ground. The most actively traded contract for May delivery settled at increases of CNY142/ton ($21/ton) for PP at CNY8725/ton ($1082/ton without VAT) and CNY80/ton ($12/ton) for LLDPE at CNY9720/ton ($1206/ton without VAT).

Domestic market is responding very positively to the reviving futures trade with traders reported concluding deals without much resistance even at CNY100/ton ($15/ton) higher than last week for both PP and PE. Only LDPE film offer again decrease CNY50-100/ton ($7-15/ton). A trader sold 200 tons of HDPE film in one single order said, “We are not aggressive in pushing cargoes out as we hope to achieve better margins in the coming days. It appears that futures market has reached the bottom and sentiment might continue to improve in the near term.

Meanwhile, many mulch sheet manufacturers are operating at around 70-80% capacity, which indicates a possibility of better replenishment activities. A converter informed, “Prices have been softening recently and at the current levels, our profit margins come back to the positive zone again. We are considering to restock some quantity in the coming days.”

In the import market, most offers for Middle Eastern homo-PP cargoes remain above the $1100/ton threshold and a trader commented, “Indian homo-PP at $1060/ton CFR China, LC 30 days term is the lowest offers we received today. Import cargoes arrival in the coming month might be really limited, which might push prices up. We hope to see sustained firming trend in futures market.”

Import LDPE film to China in contrast carrying much of cloudy outlook amid lengthy supply. Lower costs cargoes purchased previously are arriving and couple of traders have expressed their intention to re-export to Southeast Asia  where supply is still tight.     

In Southeast Asia, there is very limited movement on the first trading day of the week with couple of suppliers are attempting to maintain offers unchanged week on week basis. However, plunging ethylene cost has rippled market concern despite knowing that ethylene prices based on CFR Northeast Asia term has been swollen beyond market acceptance.

A Vietnamese buyer commented, “With the latest development in the upstream market, we think import HDPE film to Vietnam above the $1200/ton threshold might attract very limited buying interest. We might see further price adjustment this week; therefore we prefer to remain on the side-line until market trend become clearer.”

Other market sources in contrast believed that the recent fall in ethylene costs in Northeast Asia might have limited impact on the Southeast Asia region, as PE market has spent most of the first nine weeks of the year traded below costs. “We think the weak demand condition stem from slow end product business would continue to pressure PE supplier to step back on their offers; yet we are not expecting any drastic reduction.” And with Chinese buyers gradually returning to the market, Southeast Asian buyers are cautiously monitoring the sustainability of the trend to determine if market is nearing the bottom.

The regional PP market is rather calm and there are only few offer emerged at stable to softer level compared to last week. As suppliers agreed to discount, it appears that buying interest also improve. A Thailand producer sold homo-PP yarn to Indonesia $1190/ton CIF, LC AS term said, “Our customers are more responsive after the reduction. We are still having a small quantity this week and hope to achieve similar levels.” Meanwhile, situation remains sluggish in domestic ground with local producer rolling over homo-PP prices for another week. A trader added, “We are dealing mostly with contract business recently as spot demand is not showing any improvement.”

“Yet, we think room for further reduction is getting smaller and dutiable cargoes at the range $1100-1120/ton is now our expectation for deals this week,” a Vietnamese buyer added.