Asia Daily PP and PE Overview 09 Mar 2017

In China, futures market extended to weakening trend amid bearish expectation amongst investors. May delivery contract for PP dived another CNY122/ton ($18/ton) day-on-day to settle at CNY8276/ton ($1022/ton without VAT). Same contract for LLDPE slid CNY145/ton ($21/ton) to reach CNY9260/ton ($1144/ton without VAT).

Domestic spot market however, is not suffering from the depressing demand condition, as the number of deals reported is rather satisfactory. “The only issue is that buyers continue to search for cargoes at the lower end of the overall prices range, therefore, we conceded to another CNY100/ton (14/ton) reduction on PP cargoes to facilitate sales,” a trader commented.

Private data showed a 10 per cent (or approximate 105,000 tons) reduction in domestic total PP and PE inventories at major producer’s warehouses compared to earlier this week. “A drastic pick up might be difficult to materialise, however, if the restocking activities hold at the current rate for the remaining of March, we would expect more bullish condition in April,” a domestic producer added.     

Offers in the import market hold steady though buying activities are not strong as buyers put more interest in the competitive local cargoes. Several players have brought up the discussion of a possibility that supply in China might tighten up in the medium term amid banking issues relating to Korean and UAE origins cargoes. A trader explained, “Due to conflict documentation details, many banks in Ningbo refused to open letter of credit for a number of UAE origins cargoes. Import arrival in late April might be very limited.”  

In Southeast Asia, players in the PE sector become even more concern after a major Saudi Arabia producer slashed March shipment offers by $50-60/ton from initial price list to Vietnam. The latest price revision bringing HDPE film to $1180/ton and LLDPE film to $1210/ton, CIF Vietnam, LC AS term. Such drastic movement has concerned many other suppliers, however, buyers are showing calm, wait and see stance instead. A converter commented, “The PE market is deteriorating faster than the upstream ethylene market. Outlook is really cloudy, especially when end product orders are weak. We prefer to monitor further movement before taking position.”

Domestic traders in Vietnam are on the other hand, attempting to deplete on hand cargoes amid bearish outlook in the near term with discounts available. A trader source informed, “Players are panic observing the plunging energy, ethylene and import market. There is certainly no unified trend in the local ground at the moment. This might therefore hurt buying interest for import material.”

Domestic Malaysia market however, witnesses better purchasing activities as buyers here have been holding replenishment for some time. A trader commented, “Our sales has improved compared to February, yet remain weak year on year basis. For April delivery offers, we are not expecting any significant hike from domestic producer, especially at the current condition in the import ground.”      

PP market meanwhile remains largely stable compared to the earlier day, however trading activities are weak. Chinese suppliers stay active in seeking for opportunities in Southeast Asia, though most offers are for Chinese material instead of re-export cargoes. A market source said, “We received request for bids for a number of Chinese PP cargoes to be shipped from Shanghai and Ningbo port. This might depict weak demand condition in local China market, in which we prefer to take cautious stance.” From another aspect, it appears that buyers in the country are showing stronger interest for cargoes priced below the $1100/ton threshold and offers at the upper end of the overall range is not attracting sufficient attention.

In local Indonesia, traders are offering $10/ton reduction on homo-PP cargoes from last week on persistent weak buying interest. “We placed bid for domestic cargoes at below $1200/ton threshold considering the weakening import market, however, our supplier has yet to give feedback,” a buyer commented.