Asia Daily PP and PE Overview 14 April 2017

In China, Dalian Commodity Exchange fell five straight sessions this week, with the most actively traded contract for September delivery slumped another CNY208/ton ($30/ton) for PP to reach CNY7739/ton ($961/ton without VAT). LLDPE contract settled at CNY8840/ton ($1098/ton without VAT). Both contracts are at the lowest level since beginning of the year.

Trading activities in domestic spot market remains mediocre as converters only source hand to mouth basis. However, total PP and PE inventories at local major producers’ warehouses have reduced to moderate levels, eliminating the need for suppliers to slash offers in large range to attract sales. There is only a discount of CNY50-100/ton ($7-14/ton) for both PP and PE today and traders remain active in replenishing materials. “This situation might not be able to sustain for too long if demand from converter side does not improve, as traders are lacking of outlet to direct their cargoes, including arbitrage opportunity on futures market.”

Limited number of direct offers observed in the import market since many major international suppliers are away for Easter holidays. “Import market recently gains support from strong energy market and lack of inventories pressure at overseas suppliers side. That is why even with limited support from domestic buying interest, sellers are not reducing their offers,” a trader said. The source added that buyers are monitoring closely further development in Southeast Asia and Europe to gauge the likely market direction in the near term.       

In Southeast Asia, the general sentiment is calmer on the final trading day of the week as couple of market are on Songkran and Easter holidays. There is very limited number of new offers and players are mostly waiting to see clearer market trend in the coming week.   

Vietnamese buyers were informed that Saudi Arabia’s Sabic is encountering unspecified issues at two of its HDPE lines, resulting in unavailability of HDPE film supply to the country in April and May. “Our suppliers could only resume delivery for this grade by June, therefore we are holding back on the remaining quantity on hand hoping to achieve better prices in the near term,” a regular buyer for this material informed. At the moment, this material is traded at premium compared to other HDPE film origins in domestic Vietnam market with another buyer commented, “Due to the lack of supply, traders are holding very firm on this cargo at VND29,700,000/ton ($1190/ton without VAT), FD Vietnam, LC AS term. We think this could also support the outlook in the near term.”

In addition, Southeast Asian buyers are expecting some small hike of $10-20/ton for May delivery PE offers from Middle Eastern suppliers due to stronger ethylene costs. However, many are questioning the sustainability of the trend amid slower demand in European market and persistent sluggish condition in China.  

In the PP market, South Korean supplier refused to give any additional discount on their homo-PP cargoes claiming oversold during late March 2017. A buyer received offer at $1150/ton CIF Vietnam, LC AS term and placed bid at $1130/ton with the same term said, “Our supplier has not responded to our bid. Other mainstream suppliers are not giving any offers this week, which might indicate possible price increment in the coming week.”

Another buyer purchased Chinese regular homo-PP yarn at $1090/ton CIF Vietnam added, “However, competitive Chinese material could hold back the firming trend, minimizing the possibility of any significant hike.” It is worth noting that a large portion of Chinese origin homo-PP cargoes available in Vietnam at the moment is coal based grade.