Asia Daily PP and PE Overview 20 Mar 2017

In China, futures market opens the fresh week on mixed direction as May delivery contract for PP subtracted CNY70/ton ($10/ton) from last week to reach CNY8292/ton ($1027/ton without VAT). LLDPE futures on the other hand, extended the firming trend, gaining CNY50/ton ($7/ton) to close at CNY9445/ton ($1170/ton without VAT).

Domestic spot market however, remains resilient with a good number of deals reported. Offers for PP, LLDPE and LDPE film increased another CNY50-100/ton ($7-14/ton) from last week and only HDPE prices hold steady. It is reported that many converters have come back to make replenishment though purchased quantity is still smaller than expected. “Market has been on the recovering track for a week now, however, prices are unable to firm up in larger range as converters are still not aggressive in making fresh purchases,” a trader commented. Market sources added that profit margins for converters in the PP sector are narrowing amid end product price cut to stimulate businesses.

Meanwhile, LDPE film market seems to have regained balance as the number of deals for both import and local cargoes are improving. A trader purchased Middle Eastern LDPE film cargoes at $1200/ton CFR China, LC AS term said, “We think market might continue to recover in the near term. The number of cargoes arrive in the coming months might be limited since players refused to make fresh purchases after the Lunar New Year holidays. We managed to sell a good quantity in local market, though with very small margins due to higher costs previously.”

There are very limited import offers for homo-PP to China today, especially from Middle Eastern makers, though a major Indian producer has reduced prices by $10/ton from last week to reach $1050/ton CFR China, LC 60 days term. A trader said, “This offers are still higher than domestic material, therefore very limited buying interest at the moment. It looks like international suppliers are holding firm stance on their cargoes, waiting for local ground to catch up rather than slashing their offers to facilitate sales.”       

In Southeast Asia, there are very limited number of offers observed on the first trading day of the week while buyers are mostly taking wait and see stance on the side line. It is reported that homo-PP offers from regional makers at the upper end of the overall price range are facing stiff resistance as buyers constantly comparing with softer trend for dutiable cargoes.

A major Thailand producer announced weekly offers to Indonesia at $10/ton reduction on homo-PP yarn and injection compared to last week reaching $1270/ton CIF Indonesia, LC AS term. A buyer commented, “Local suppliers have also slashed their offers by $20/ton week on week basis and we could obtain material from distribution market at $1220-1230/ton delivered term. We think import offers above the $1200/ton threshold at the moment are no longer attractive.” Market sources also reported to have purchased Vietnamese homo-PP yarn at $1180/ton CIF Indonesia, LC AS term.

Meanwhile, a Middle Eastern producer hold very firm on their homo-PP injection offers to Vietnam at $1080/ton CIF, LC AS term, refusing any lower bids. A converter in the country said, “Other suppliers have yet to open new offers. We are monitoring further development and might make some purchases this week if market shows signs of stabilizing. Our concern is that propylene is still softening.”

In the regional PE market, players are awaiting fresh offers from Middle Eastern suppliers with most are expecting reduction from last month considering the large fall in ethylene costs. A regional buyer commented, “We think HDPE film might witness larger discount than LLDPE film as offers for this grade surged too quickly in the previous month. Besides, Southeast Asian producers have already stepped back on their offers, which might guide other international suppliers to follow the trend.”

In fact, Indonesian buyers reported to have received Philippines HDPE film at $1180/ton CIF Indonesia, LC AS term, some $20/ton dropped from last week with a buyer said, “We think that Southeast Asian producers are having little room more to cut prices any further as the recent offers are already below the theoretical costs. Unless, ethylene continue to slide and demand persist the current condition in the near term.”