Asia Daily PP and PE Overview 07 Mar 2017

In China, futures market revert the firming trend recorded on the first trading day of the week to settle lower today. May delivery contract for PP inched CNY66/ton ($10/ton) down to reach CNY8642/ton ($1010/ton without VAT) and LLDPE contract slid CNY75/ton ($11/ton) to close at CNY9655/ton ($1196/ton without VAT).

Trading activities in domestic spot market hold rather steady with little sign of any drastic improvement. Suppliers are attempting to implement small increment of CNY50-100/ton ($7-15/ton) on PP cargoes to have a clear view on market acceptance. A domestic producer said, “Respond from converter side is rather disappointed. Supply is still ample in local ground and we think this is the primary reason encouraging buyers to slacken replenishment activities.”

“Besides, weak end product order and cash flow issue also slow down the market. It does appear that the month of March might not be as bullish as expected,” another trader added.

In the import ground, it is reported that several large size converters are sending in their inquiries for import homo-PP despite comfortable domestic supply. A buyer explained, “There has not be many import offers or purchases of deep-seas cargoes since we resumed operation in early February, which mean, cargoes arrival in late April will be very limited. We are checking on new offers and might procure some quantity if prices meet our expectation.”

Meanwhile, a major Thailand producer continue to down adjust their HDPE offers to the country by $20/ton from last week with a trader responded, “Even with the reduction, domestic cargoes are still more competitive. There are too much of low cost USA cargoes arriving, which might continue to pressure the near term outlook.”     

In Southeast Asia, the general sentiment sees little improvement as most international suppliers hold position to monitor further development in China before announcing fresh prices, while buyers adopted more of conservative stance. Continued softening upstream costs might downplay seller’s effort to hold firm on their prices.

Vietnamese players reported to have received fresh homo-PP offers from a major Saudi Arabia producer at $20/ton lower than last week, reaching $1130/ton CIF Vietnam, LC AS term. Despite the price reduction and limited availability, buyers in the country show very little interest in the cargoes with a trader commented, “Our supplier refused any further discount on deal. There are still some re-export cargoes from China available at lower price and we have no plan to make fresh replenishment at the moment as we are having comfortable supply on hand.”

The number of re-export homo-PP offers from China to Southeast Asia reduces visibly this week, which to many market participants, act as the first condition to a stabilising trend. “We shall closely monitor the upstream market as well as the restocking activities to gauge the likely market trend in the near term,” an Indonesian trader commented. “At the moment, however, purchasing activities in domestic ground remain sluggish, in which traders are offering at well below producers’ price list in order to smoothen sales process.”

In the PE sector, as market expected, ethylene costs based on CFR Southeast Asia term fell $20/ton on Monday, following the weakness observed in the Northeast region. In spite of the general expectation that room for further reduction is rather limited, buyers are still waiting for additional discount with a Vietnamese buyer commented, “We think import HDPE film prices might return to the level $1170-1180/ton as buyers strongly resist the offers above the $1200/ton threshold. Domestic prices are still weak, hence we might not proceed with any purchases within this week.”