Asia Daily PP and PE Overview 27 March 2017

In China, futures prices on Dalian Commodity Exchange slid considerably on the first trading day of the week. May delivery contract for PP fell CNY297/ton ($43/ton) to reach CNY7906/ton ($984/ton without VAT). LLDPE contract dropped CNY205/ton ($30/ton) to close at CNY9195/ton ($1144/ton without VAT).

Buyers in domestic spot market appear to be more cautious in their purchases as the week starts on weak futures trading. Local suppliers immediately responded by offering CNY50-100/ton ($7-14/ton) discount on both PP and PE cargoes to smoothen sales process. “We are still receiving enquiries for LDPE film, though mostly from traders. We think prices might not reduce significantly since buyers would still need to make replenishment to ensure continuous production,” a trader from Xiamen reported. Many other players in the country prefer to adopt wait and see stance, especially converters in spite of the unlikelihood that domestic suppliers would reduce prices toward the month end.

In the import market, there are very few new offers observed as international suppliers also switch to be more conservative with a Thailand producer said, “Sentiment in China has improved over the past two weeks and we hope the condition would persist in the coming days. At the moment we are not facing any sales pressure due to the up coming turnaround and we are planning to implement a small increment on the new offers this week.”    

In Southeast Asia, there are very limited number of transaction on the first trading day of the week as buyers, especially in the PP market, remain on the wait and see mood, hoping to see further price reduction. Suppliers are on the other hand, showing no interest in cutting prices on the back of lacking inventories pressure. The market therefore clings on this tuck of war.

An Indonesian buyer received offers for Middle Eastern homo-PP at $1150/ton CIF Indonesia, LC AS term said, “We planned to wait for prices to reduce below the $1100/ton threshold before making additional purchases, however, our supplier is very firm on their cargoes. Domestic offers continue to reduce this week, and holding very competitive position over import material. We think the downward pressure is there to persist in the near term.”

Several suppliers believed that market is nearing the bottom and that room for further reduction in rather small. A regional trader, who is active in selling homo-PP to Indonesia added, “We have yet to adjust our offers this week. Market is quiet, yet it is hard for prices to reduce significantly at the current costs and supply condition. We do think the bottom is near, just that a strong rebound is not in the general picture for now.”

In the regional PE market, more international suppliers announced April delivery offers to the region with reduction from last month, though buyers continue to place bid at well below offered levels. A major Saudi Arabia producer slashed HDPE film prices by $50/ton month on month basis to reach $1200/ton CIF Vietnam, LC AS term while LLDPE film offers are down $40/ton to reach $1220-1230/ton with the same term. A buyer in the country commented, “We think the maker might need to concede to another $40-50/ton discount in order to attract buyers. Local market is weak and traders are making losses at the current import prices.”

A number of other buyers, who have purchased Saudi Arabia cargoes late last week at $1170/ton for LLDPE film and $1160/ton for HDPE film are making these levels as a benchmark for other sources, from which they have place bids for the latest offers at similar prices.