Asia Daily PP and PE Overview 28 March 2017

In China, futures prices hold largely stable today with May delivery contract for PP added only CNY1/ton to settle at CNY7928/ton ($983/ton without VAT). LLDPE contract has not changed too much from the previous trading day, settling at CNY9145/ton ($1134/ton without VAT, only CNY5/ton ($1/ton) lower.

Sales in domestic spot market is slower compared to past weeks though suppliers are offering CNY50-100/ton ($7-14/ton) discount on both PP and PE cargoes. In spite of market expectation that converters might need to make larger replenishment this week before going off for the Tomb Sweeping Festival, buyers appear to be more cautious. As a result, there is a slight build up in total PP and PE inventories at major local producer’s warehouses.

A trader in Zhejiang reported, “We only managed to conclude some HDPE blow moulding in local market today. Buyers are less active than the past week. At the moment, we are having some cargoes at bonded warehouse to re-export to Southeast Asia, yet it seem the arbitrage window has closed.”

In the import market, a major Thailand producer lifted PE offers to China as planned earlier, however, market is not very positive about the hike. In fact, latest offers indicated $10/ton increased for HDPE and $30/ton on LDPE film. A buyer received the new offer commented, “The price increment comes at the time sentiment is low, hence we think interested buyers might only request to conclude deal at old offers.”

On the other hand, Middle Eastern homo-PP suppliers are maintaining firm stance on their cargoes after a round of price cut late last week. A trader offers the cargoes at $1045/ton CFR China said, “Chinese buyers are still in favour for domestic material amid lengthy supply and competitive prices, yet we are not in rush to reduce offers any further due to lack of inventory pressure. “

In Southeast Asia, regional market received more PE offers from international suppliers though most deals reported are at discount. Import HDPE film prices have returned to the range $1160-1170/ton CIF Southeast Asia, LC AS term given improved supply and softer than expected demand condition.

A buyer in Malaysia placed bids for Middle Eastern HDPE film cargoes below the $1150/ton threshold, pointing to soft upstream costs as main support, added, “Meanwhile, we are also waiting for domestic suppliers to announce fresh offers. It is anticipated that local prices might fall MYR100-300/ton ($23-68/ton) from last month following the recent development in the import ground. Demand for our end product remains sluggish, hence we might only replenish small quantity this month.”

A major Thailand producer sold HDPE at $1170/ton for film and $1180/ton for yarn grade, CIF Vietnam, LC AS term informed, “We have temporary withdrawn the offers for now. Our supply is normalizing and we hope that with better prospect in the upstream ethylene market, the PE would see some support.”   

The regional PP market seems to be in a better position that a number of converters have expressed their intention to make replenishment in the coming days on the belief that prices might be nearing the bottom. Import homo-PP to Southeast Asia has been steadily going down since it hit the peak during late February; however, international suppliers are taking firmer stance on their available cargoes in recent week, refusing any additional discount. The previous price falling was mainly driven by the heavy in-flow of re-export cargoes from China, players said, yet actually direct supply, especially from Middle Eastern suppliers remain relatively tight. “And as the number of cargoes from China diminished, market is regaining stabilization,” a regional trader commented.

Many buyers within Southeast Asia were initially holding the wait and see stance, hoping to see further price cut before making additional replenishment are now planning to come back to make purchases. A Vietnamese buyer said, “There are very limited number of new offers in the market these two weeks. Our suppliers are firm on their cargoes, therefore we are planning to replenish gradually to avoid price risk.” Despite such intention, Southeast Asian buyers are generally still very cautious about making large purchases.