Asia Daily PP and PE Overview 19 April 2017

In China, futures prices on Dalian Commodity Exchange appear to regain some balance after seven straight falling sessions. September delivery contract for PP gained CNY17/ton ($2/ton) from yesterday to settle at CNY7668/ton ($953/ton without VAT). Meanwhile, LLDPE contract still experienced small reduction of CNY15/ton ($2/ton) to reach CNY8785/ton ($1091/ton without VAT).

Buyers in domestic spot market continue to source material hand to mouth basis while traders are complaining about the lack of support for any strong pick up in the near term. “Many traders are offering arbitrage PP and PE cargoes at CNY200/ton ($29/ton) below the current market levels since futures market does not provide sufficient margins. We only manage to conclude 5 tons of homo-PP to regular customers today.”

In the import market, offers for Russian and USA homo-PP have slipped to below the $1000/ton threshold, reaching $990/ton CFR China, LC 90 days term. Though the quantity available is rather limited, players still appear to be more cautious. A trader said, “Suppliers might testing market acceptance as buyers have been resisting offers for the mainstream cargoes for couple of weeks now. We are still holding firm at $1010/ton wit the same term for our cargoes. The Chinese Yuan has appreciated recently and we think this would support the general sentiment.”

Meanwhile, PE cargoes from Saudi’s Sadara appear again in China this week after several months’ absence due to the shutdown during last December. However, buying interest in this sector is not much different from PP. An Iranian trader reported, “Our sales activities to China is rather slow recently, and we even cut formula prices compared to March in order to encourage purchases. Our customers are avoiding large replenishment as much as they can amid weak end product orders. The number of Iranian cargoes arriving to China during May-June might be less than usual.”    

In Southeast Asia, market remains mostly unchanged from the previous trading session; however there are some mixed development observed in the LDPE market. In fact, major Thailand producer announced fresh weekly offers for LDPE film to Vietnam with $20/ton reduction from last week, reaching $1320/ton CIF, LC AS term. A buyer placed bid below the $1300/ton threshold said, “We plan to make a small purchase if the supplier accept out idea level. There are several off-grade LDPE film cargoes just arrive Vietnam main-port which might affect local pricing.”

Such movement contradicts the recent hike in the upstream ethylene market, which increased $60/ton from earlier this month to reach $1200/ton CFR Northeast Asia term. Southeast Asia value added $25/ton within the same time frame. Besides, regional LDPE film supply might tighten in the near term given the outage at Malaysia’s Lotte Chemical Titan last week and the production disruption at Singapore’s TPC.

A distributor said, “Our principal supplier in Singapore has stopped accepting orders due to feedstock issues that affect operating rate, while regular customers continue to request for additional quantity. We think the LDPE market might remain firm into May.”

There is no additional discount reported in the PP market today, yet regional buyers hold to the notion that prices are unlikely to firm up in the coming weeks. An Indonesian buyer informed, “Middle Eastern suppliers have yet to open new prices, however, producers from Singapore and Philippines are collecting bids or indicating prices for homo-PP yarn at relatively competitive levels. We think that the upside of the market is rather limited at the current condition.” One positive sight in Indonesia market is that domestic suppliers are suspending the special pricing scheme that has been in place over the past couple of week and attracting buyers away from import cargoes.