Asia Daily PP and PE Overview 17 April 2017

In China, futures market continues the journey south with September delivery contract for PP loses another CNY133/ton ($19/ton) to reach CNY7670/ton ($951/ton without VAT). LLDPE contract edged CNY90/ton ($13/ton) lower from last week, settling at CNY8805/ton ($1092/ton without VAT).

There are very limited trading activities in both local and import ground on the first trading day of the week, and despite positive economic data released by the government, demand sees little improvement. Suppliers down-adjusted their offers by CNY50-100/ton ($7-14/ton) for both spot PP and PE offers and larger reduction of CNY150/ton ($22/ton) is reported on LDPE film cargoes.

On another notes, Chinese players reported that strict environmental compliance inspection has forced many recycle material manufacturers to shutdown due to unqualified waste disposal system. “This has encouraged the demand for prime cargoes. Though buyers are becoming less aggressive these two weeks, we are still seeing the basic need in the market. Prices therefore might follow relatively stable in the near term.”

And in spite of the off peak season for agriculture film sector which weakens buying interest for LDPE and LLDPE film, a good portion of market participant believed that LDPE market shall not witness any major price cut amid a series of plant shutdown. Within domestic market, four LDPE plants are currently offline, accounted for a production loss of more than 56,000 tons of material. Besides, water supply issues forced Malaysia’s Lotte Chemical Titan to shut its 230,000 tons/year LDPE unit last week. Though the company is on track to restart the line within this week, supply has been affected. Singapore’s TPC is planning a shutdown at the 180,000 tons/year LDPE line after a technical glitch hit its ethylene supplier’s cracker. Both countries are among top ten LDPE exporters to China in 2016, with respective quantity at 130,000 tons and 70,000 tons, according to China Custom data.

Meanwhile, PP traders are attempting to eliminate offers nearing the $1000/ton threshold as observed two weeks ago due to lack of cargoes from international sellers. A trader said, “We maintained offers for Indian and Saudi cargoes at $1040/ton CFR China, yet unable to conclude any deal. Buyers are pressing for larger than usual discount, which we can’t fulfil.”

The Southeast Asian market sees no drastic movement on the first trading day of the week as suppliers take wait and see stance to have clearer direction on near term outlook. It appears that sentiment in the PP market is loosing steam as Vietnamese buyers withdraw to the side-line while domestic suppliers in Indonesia determined to attract buying interest from local buyers by offering additional discounts.

One of the most important factors that encouraged more of conservative stance among Vietnamese buyers is the widely available of Chinese material at competitive prices. A converter purchase regular Chinese homo-PP yarn at $1090/ton CIF Vietnam, LC AS term said, “Compared to other dutiable cargoes, we think this price is rather competitive. Even coal-based homo-PP is widely available at the moment. We think this could lock the market from jumping too significantly in the near term.”

There are very limited offers from Middle Eastern suppliers while South Korean and Indian sellers are refusing to enter price negotiation at the moment. An Indian producer offered at $1120/ton CIF Southeast Asia in the previous week said, “Yet, we are unable to conclude any deal at this price. Buyers are resisting the latest hike and we are monitoring further development before deploying any adjustment if needed.”

Regional PE market is awaiting fresh offers from international suppliers. At the moment, demand for HDPE film in local Vietnam holds better postion than other PE film grade. In fact, as Saudi’s Sabic unable to supply couple of HDPE grades due to unexpected technical issues, domestic traders in Vietnam lifted HDPE film prices to VND30,000,000/ton ($1200/ton without VAT) FD Vietnam, cash term. A converter purchased locally held Saudi’s HDPE film cargoes at the mentioned price said, “We placed bid at VND200,000/ton ($9/ton) discount, however the supplier refused to accept. Supply is tight in local market for now.”

A trader explained, “Import arrival for HDPE film is limited while LLDPE film supply is more comfortable partially thanks to the highly available near prime/off grade cargoes. We could not lift LLDPE film prices any higher than VND30,500,000/ton ($1220/ton without VAT) FD term.”