Asia Daily PP and PE Overview 03 May 2017

In China, futures prices on Dalian Commodity Exchange softened slightly from the previous session. September delivery contract for PP inched CNY9/ton ($1.3/ton) lower to reach CNY7794/ton ($967/ton without VAT). LLDPE contract decreased CNY25/ton ($4/ton) to close at CNY8840/ton ($1097/ton without VAT).

Domestic spot market remains largely stable from the previous trading day with better number of deals for LLDPE film reported. Most suppliers seem not in hurry to cut offers to stimulate demand while converters prefer to adopt wait and see stance amid slow end product business. A flexible packaging converter said, “It is currently off-peak season for our end product business, hence we only source material hand to mouth basis. The on going environmental inspection has forced a number of small scale plastics bags converters to shutdown, which limit demand to a certain extent.”

In the import market, USA origin HDPE cargoes emerged at very competitive prices. A good number of deals for these cargoes are reported at $1030/ton for HDPE blow molding and $1040-1050/ton for HDPE film, all based on CFR China term. A trader added, “USA suppliers might be depleting inventories before the summer break, however, allocation this time is not as large as it was during late last year. Despite longer shipping time, we have procured some quantity due to competitive price level.”

Import homo-PP to China is rather mixed. While couple of suppliers has initiated price cut in the previous trading days, many others are still holding firm on their cargoes. In fact, today, couple of trader informed that they are maintaining offers for Saudi Arabia’s homo-PP in the range $1055-1080/ton CFR China, LC 0-90 days term, knowing that domestic materials are much more competitive. “Certain grade of Saudi material is very tight and our supplier can achieve better margins in other market,” a trader said. Such decision might keep the market from rapid reduction, yet it could also cause market resistance to persist longer.

In Southeast Asia, most Middle Eastern suppliers have not opened fresh offers immediately after the holidays while the general sentiment within the region remain soft. A major regional producer down adjusted PP prices for the second time since May shipment was offered earlier last week, bringing latest offer for homo-PP to $1160/ton CIF Southeast Asia/DAP Malaysia, LC AS term. Market is not very confident about acceptance rate event at the discounted prices. “This adjustment is not very surprise to us since regional demand has been weak recently. However, the producer is attempting to limit the range of price reduction due to tight cargoes available stemming from the recent production disruption. We think buyer acceptance at the latest price level might not be strong,” a market source commented.

Indonesian PP market appears to be the weakest among Southeast Asian countries and overseas suppliers find it difficult to attract buying interest here given the available of competitive local material. “We are offering ready stock homo-PP yarn to local buyers at $1150/ton without VAT, FD Indonesia, and received no bid at the moment,” a domestic trader reported. An international trader offered Southeast Asian homo-PP at $1170/ton, CIF Indonesia said, “Buyers are bidding at $1050/ton with the same term. Most are not showing eager to buy if prices are not matching their idea. We might need to divert our available cargoes to other market.”

Despite the general bearish condition within the region, Vietnam market resumes working after a long holiday on rather stable notes. Except a Saudi maker stepped back on PE prices to the country in the previous session, other suppliers are holding very firm stance. A trader received offers for Middle East PE at $1145/ton for HDPE film and $1150/ton for LLDPE film, CIF Vietnam, LC AS term said, “We plan to make a small replenishment this week. Domestic market is steady and we still can sell regular quantity today. However, softening import market might affect local sentiment if the current condition persist too long.”

Firmer ethylene costs have also provided better support to the PE sector though market participant are not seeing this trend to be sustainable as derivative PE market is now traded at negative margins.

Meanwhile, a major local producer in Malaysia offered additional MYR50/ton ($11/ton) discount on spot PP and PE cargoes, totaling a drop of MYR150/ton ($34/ton) month on month basis. Despite such reduction, overseas seller claimed to see better opportunity in Malaysia than Indonesia at this point of time.