Asia Daily PP PE Report 04 Mar 2016

In China, Dalian Commodity Exchange prices ended the week with drastic hike as the market is blanketed by a general optimistic expectation. Contract number 1605 for PP futures jumped CNY221/t ($34/t) from yesterday’s gains to settle at CNY7001/t ($918/t without VAT). LLDPE futures followed suite with CNY120/t ($18/t) higher to reach CNY9155/t ($1200/t without VAT).

With the support from continuous firming futures trading, domestic sellers are also more confident in implementing larger hike on their spot PP and PE cargoes today. In spite of the fact that local cargoes are announced at CNY100-200/t ($15-31/t) higher than the previous trading session, demand remains healthy.

A trader in Zhejiang said, “After lifted the offers, we still managed to conclude a satisfactory number of deal. However, we are trying to limit the quantity sell out today as we expect further price hike in the coming week. Futures prices increase sharply these days has given market a sentiment boost.”

In the import market, limited supply has pushed homo-PP from dutiable origins to above $900/t threshold CFR China, LC AS term – the best level since late November 2015, according to CommoPlast record. A trader from Ningbo reported, “We sold Indian and Middle East homo-PP yarn and injection cargoes at $925-930/t CFR China today for March and April arrival. Our regular customers are rushing orders for export market, hence they accept to purchase at this price.”

Meanwhile, another trader in the PE market said, “Sales for HDPE film from our side is pretty good as most of the cargoes being offered are set to arrive soon. We can see a big difference in order placement between converters who is active in export and local market. Exporting converters are more active in making purchases now while local converters are suffering from weaker economy.”

In Southeast Asia, the firming sentiment has not changed on the last trading day of the week with minimal PE offers observed in the market. In fact, many sellers have already sold out their allocation for this week and preparing for the next opening. A major Thailand producer said, “Initially we planned to announce offers for April shipment to Vietnam this week, however, due to limited supply and good demand from other regional market, we have to postpone our offering. Our regular customers are sending in good enquiries, signalling a bright market prospect in the coming week.” Meanwhile, players in Malaysia are complaining about the new government restrictions in hiring foreign workers, which caused a strike in operation costs. A converter said, “Our number of worker has reduced 35% compared to end of last year in which we could not afford to operate our plant at full rate. Demand for our end product is not very strong, hence our margins is being squeezed.” An international trader added, “Compared to other regional market, we see demand in Malaysia is rather slothful. Considering the current situation, March looks like a strong month to us, however we feel a little uncertain about Apr. We are very cautious about replenishing cargoes at the moment.”

A similar scenario is reported in the PP market, however, there were some attention catching pulses in Vietnam in which some local traders decided to cut offers to domestic buyers in spite of firming international market at the background. Players defended this as an act to release warehouse pressure due to a large volume of cargoes arrived these few days. A trader said, “We elected to maintain our offers as we do not see the necessity in cutting prices. Supply from international sources is limited and this might affect local market in the coming month.” In Indonesia, local producer has implemented another $10/t hike on PP cargoes on the back of a persistent tight supply.

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