Asia Daily PP and PE Overview 17 Mar 2017

In China, futures market completed five straight trading sessions this week with increases, signalling a more sustained recovery progress. May delivery contract for PP gained CNY44/ton ($6/ton) to close at CNY8355/ton ($1033/ton without VAT). LLDPE contract added CNY75/ton ($11/ton) to reach CNY9405/ton ($1163/ton without VAT).

Trading activities in local ground remain healthy and suppliers continue to implement CNY100-150/ton ($14-21/ton) hike on both PP and PE cargoes. A positive sign is that even LDPE film market has regained some momentum, adding CNY200/ton ($29/ton) from yesterday. A trader commented, “The number of deals concluded in local ground today is satisfactory though many converters have replenished the needed quantity and take a wait and see stance. Inventories are still high and even after a week of continuous increment, local prices are still more competitive than import offers.”

In fact, CommoPlast data showed that on an average, domestic homo-PP based on EXW China, excluding VAT term is about $50/ton lower than import offers based on CFR China at the moment. Players therefore expected some adjustment to take place in the near term to bring the market back to normal condition. A market source commented, “It is hard for domestic prices to surge drastically amid the current inventory level. It would make more sense that international suppliers step back on their offers, given falling upstream costs and also weakening Southeast Asian demand.”

In Southeast Asia, the number of transaction shrink again on the final trading day of the week mostly due to lack of new offers from international suppliers. Buyers across the region seem firmer on their bids for import homo-PP, even though believing that room for further reduction is narrowing.

An Indonesian buyer insisted on their buy idea for Vietnamese homo-PP at $1180/ton CIF Indonesia, LC AS term said, “Our supplier refused to accept our bid at the moment. We are not in rush to make fresh purchases; therefore we might wait until next week.” The source also added that local traders continue to offer based on delivered term at very competitive levels, which might be an issue for import cargoes from non-dutiable origins.

In Vietnam, it is reported that Middle Eastern homo-PP injection offered at $1080/ton CIF Vietnam LC AS term with a converter placed bid at $1050/ton said, “Our supplier has also refused our bid and we decided to wait a little longer before making fresh replenishment. Propylene costs continue to fall and this might pressure seller in the near term.” Trading activities in local Vietnam market is described as very weak as buyers mostly adopted wait and see stance. The condition might worsen in the coming days as the availability of non-prime material at low prices is putting more pressure on the market, players said.

In the PE sector, ethylene costs based on CFR Southeast Asia fell another $20/ton to reach $1080/ton on Thursday while CFR Northeast Asia value plunged $45/ton, reaching the lowest level since beginning of February 2017. Market is totally muted. A regional producer said, “We are planning to announce new offers soon, however, we are really concern about the market condition in Asia as prices are falling too quickly. Import LDPE film to China plunged too quickly and might affect the general sentiment in Southeast Asia.”