Asia Daily PP and PE Overview 21 April 2017

In China, futures prices on Dalian Commodity Exchange are still unable to make a solid rebound as the week ended. September delivery contract for PP only gained CNY25/ton ($4/ton) from yesterday to reach CNY7642/ton ($949/ton without VAT). LLDPE contract remain mostly unchanged, reducing only CNY5/ton ($1/ton) day on day basis reaching CNY8745/ton ($1086/ton without VAT).

Trading activities in local spot market remain largely unchanged from yesterday though sellers are attempting to hold offers for both PP and PE stable. Only LDPE film prices slipped another CNY100/ton ($14/ton) day on day basis. China market has been calm since players returned from Lunar New Year and players fear that this condition might persist in the coming months. The recent government’s renewed effort to eliminate unhealthy speculative activities has affected market confident as player concern over the possible policies change. A trader said, “This could be real demand condition without speculation. Besides, strict environmental inspection also dampens demand to a certain extent.”

A fruit basket manufacturer said, “We made huge loses by pre-stocking large quantity before the Lunar New Year holiday. Therefore, we prefer to take cautious stance at the moment. At the moment, we only keep around 100 tons of inventories on hand, and might continue to purchase hand to mouth basis.”

In the import market, there are rumours that import homo-PP yarn for USA origin has hit the $970/ton level, CFR China term, however this is not confirmed at the time this report is published. A trader commented, “This could be forward selling cargoes. For us, we are holding offers above the $1000/ton threshold.”

Even for import HDPE yarn, which were reportedly having better demand than other grades over the week, has now see $5-10/ton reduction. A trader offers Thailand HDPE yarn at $1175/ton CFR China, LC AS term said, “Demand is still there, just softer than last week, hence we offered $10/ton discount to encourage buying. We are monitoring further development as other suppliers seem to be firm on their cargoes.”

In Southeast Asia, Chinese suppliers continue to agree to additional discount on deals for coal-based homo-PP, which encourages buyers to put extra pressure on other origins. In fact, a major Saudi Arabia producer reportedly offer only $10/ton discount in their homo-PP cargoes to Vietnam at $1090/ton CIF term, however, buying interest at this level is not very strong. “That is why couple of other traders are offering up to $20/ton discount at $1080/ton for the same cargoes,” a local buyer said. The source added, “With the current demand condition in China, we do expect to see gradual price reduction in the coming weeks. Middle Eastern suppliers might be lacking inventories pressure, yet competitive Chinese material would weight down on sentiment.”

Indonesian buyers are expressing similar expectation and a number of converters reported to have stocked up sufficient material for production till early June. “Couple of Southeast Asian producer raise intention to lift May shipment offers on production issues, however we are just not confident about the firming trend. Demand for our end product started seeing some improvement compared to quarter 1, though we have sourced comfortable stock from local market.”

The regional PE market remains relatively calm with several suppliers expressed sell ideas for May shipment at mostly stable levels from last month’s done-deal. A Malaysian maker encountered plant shutdown in the past week due to water supply issues, and at the time this report is published, the petrochemical complex has yet to fully come back online. A source close to the company reported, “We are carrying large backlog in local market at the moment. Though the general buying interest within Southeast Asia is weak, we are planning to keep offers stable month on month basis to reflect the tight availability condition.”

While there are market talks that couple of Middle Eastern suppliers are facing inventory pressure, most other show no intention to offer any significant discount for the new month. “Most PE producers in Saudi Arabia faced production disruption in the first quarter of this year while healthy demand in Europe in previous months attracted great attention from sellers in this region. We aware of the situation in Asia at the moment, however, we plan to keep our offer mostly stable from last month and might implement other measure later if needed,” a Saudi producer added.