Asia Daily PP and PE Overview 27 April 2017

In China, futures market moved into the positive zone toward the end of the week with PP futures jump three digits for two sessions in a row. September delivery contract for PP added another CNY137/ton ($20/ton) to reach CNY7781/ton ($965/ton without VAT). LLDPE contract also edged CNY35/ton ($5/ton) higher to reach CNY8680/ton ($1077/ton without VAT).

Trading activities in domestic spot market is mediocre, which reflects modest pre-holiday replenishment activities. A trader said, “China market is only off for 1 day this time, and therefore the need for larger purchases is minimized.” At the meantime, sellers are leveraging firmer futures market to keep spot prices on the stable track. Sales for homo-PP is reported to be better than LLDPE film this week with a market source informed, “This is because the agricultural film season has ended. Despite stronger Dalian Commodity Exchange, we have no plan to hold back on hand cargoes as we did previously. We are still uncertain about market outlook in May.”

There is little movement in the import market and the condition might worsen toward the end of the week ahead of the Labor Day. More irregular PE cargoes show up in China this week at very competitive price levels. Iranian LLDPE film offered at $1100/ton FCA China, LC 90 days term with a supplier source said, “We have about 500 tons of this cargo and customers are placing bid for $30/ton below initial offer. We might discuss with buyers again before concluding deals.”   

In Southeast Asia, players in the PE market are actively negotiating prices with international supplier for May shipment. Though couple of traders has initiated larger than usual price cut to speed up sales process, overseas suppliers do not appear to be in rush to concede to such rapid discount claiming strong upstream costs.

A major Saudi Arabia producer agreed to only $10/ton discount on PE cargoes to Vietnam, bringing the final prices to $1150/ton for HDPE film, $1110/ton for HDPE blow moulding and $1160/ton for LLDPE film, CIF, LC AS term. A distributor offered on behalf of the producer said, “Our customers tend to pick up smaller quantity this month as there are still hope that prices could be softer in May. Sales speed is slower at these price levels, however, both local traders and converters are buying.”

Another buyer added, “So far, Middle Eastern suppliers are not showing eager to implement aggressive measures to push out cargoes ahead of the Ramadan season but rather going in steady speed. Domestic market is till doing fine in term of prices, yet local buyers are also demanding for discount as import offers softened. We only purchased minimal quantity this round.” The source also reported receiving Nigerian and Iranian LLDPE film at $1110/ton and $1160/ton respectively, CIF Vietnam, LC AS term.

The PP market is not as happening as the PE sector as buyers are more cautious about the making fresh replenishment. Although most Middle Eastern suppliers are avoiding large discount on their cargoes claiming healthy demand in other markets, including Africa, the available of competitive duty free cargoes is giving market an opposite perception about near term outlook. Thailand homo-PP yarn concluded with $10/ton discount from yesterday at $1095/ton CIF Vietnam, LC AS term today. A source close to the producer informed, “We only have 500 tons of material available and managed to sell out quickly. We have moved a considerable quantity of material to Japan as well. Vietnamese buyers are more interested in nearby cargoes these days and we are checking on additional quantity.”

Meanwhile, local homo-PP prices in Indonesia has fallen to the range $1135-1160/ton FD Indonesia, cash term this week, deterring buying interest for import material. Offers for dutiable cargoes from Saudi to Indonesia at $1100/ton CIF term are facing strong resistance. An international trader said, “Therefore, we have not opened any offer for two weeks now. We might divert our allocation to other market, where demand is better.”

In related production news, Singapore’s PCS has restarted its 450,000 tons/year No. 1 cracker after nearly two weeks shutdown to resolve some technical problems. As a result, Singapore’s TPC might be able to restart it LDPE and PP lines once ethylene and propylene supply become available from the cracker.