Asia Daily PP and PE Overview 14 April 2017

In China, futures prices continue to fall for the fourth session this week though the extent of price reduction is smaller. September delivery contract for PP reduced CNY32/ton ($5/ton) to reach CNY7935/ton ($986/ton without VAT). LLDPE contract dropped CNY85/ton ($12/ton) to close at CNY9040/ton ($1123/ton without VAT).

Trading activities in domestic spot market are diminishing with traders complain about difficulties they face in attracting buying interest. However, only few suppliers are offering small discount of CNY50/ton ($7/ton) for both PP and PE from yesterday. A converter in the BOPP sector said, “Our customers keep delaying new order, waiting for prices to go down further. As a result we are unable to replenish raw material in larger quantity.”

Players in the country appear to be loosing confidence in the near term demand prospect after futures prices fell four straight days. Many agricultural film converters are slowing down operation rate as the sector enters the off-peak season. “Most cargoes are floating in the distribution market at the moment while converters are keeping minimal inventories on hand. Market might be weak for now, but we believed that once prices rebound, the extent of prices increment would be significant,” a trader commented.

In Southeast Asia, offers remain largely unchanged from the previous trading day while many Middle Eastern suppliers have yet to announce fresh prices. The shutdown at two major regional suppliers is fueling market expectation for firmer May outlook.

As Lotte Chemical Titan forced to shut the whole petrochemical complex in Pasir Gudang, Johor as local utility company carry out upgrading work causing water supply disruption, many PP and PE cargoes concluded for April delivery to local buyers have now been postponed to early May. Players in Malaysia reported seeing tight availability for LLDPE film and PP copolymers grades. Traders have responded to the situation by lifting prices for on hand cargoes. A distributor commented, “We have to postpone the delivery schedule for many PP and PE cargoes to local buyers to early May. Supply for PP copolymers is especially tight and we have implemented MYR400/ton ($90/ton) hike on these grades and currently monitoring market respond. May outlook therefore might not as bad as initially expect.”

Meanwhile, import homo-PP to Vietnam appears to be stabilising as buyers refused to accept the latest hike amid widely available of Chinese material at competitive prices. “Import market needs to be on the stable to firmer trend in order to support local ground. This week purchasing activities improved visibly though we only implemented moderate hike on our cargoes. We hope that this trend would sustain in the coming week.”

There are also active discussions among regional players regarding possible market outlook in June with many pointed to softer note considering the Ramadan celebration on 25-26 June. “We think market might significantly slow down by second half of June, therefore, we are not planning to keep too high inventories. We also doubt the sustainability of the current firming trend in the import homo-PP market since domestic sellers are offering very competitive prices,” an Indonesian buyer said. In fact, there are forward selling offers in local Indonesia market for homo-PP yarn at as low as $1160/ton, FD Indonesia, cash term, May delivery, which might limit any significant hike in import offers.

The regional PE market is rather calm as both buyers and sellers are observing further development before making the next move. Couple of international suppliers reported of weaker buying interest in Europe due to the Easter holidays which might divert international suppliers’ attention to Asia. “In line with the firmer upstream costs, we do expect a small hike of $10-20/ton on import PE cargoes to the region for May shipment, however, buyers might resist larger hike.”

Players ative in the LDPE sector are also analysing the posible impact of Malaysia’s Lotte Chemical Titan and Singapore’s TPC shutdown on the market. A market source added, “There area also overhauls at five LDPE plants in China this month and we hope this could elevate the sentiment in Southeast Asia.”