Asia Daily PP PE Report 07 Mar 2016

In China, futures prices on Dalian Commodity Exchange start the new week on a slower momentum with PP futures posted just a minor gain of CNY36/t ($5/t) compared to the last trading session while LLDPE futures surprised the market by moving south by CNY145/t ($22/t). Contract number 1605 May delivery for both PP and PE settled at CNY7113/t ($928/t without VAT) and CNY9160/t ($1195/t without VAT) respectively.

Domestic market defeats the weaker sentiment in futures trading today and continues to gain in a larger range. Spot offers for PP increased CNY150-250/t ($23-38/t) compared to late last week and PE cargoes added another CNY100/t ($15/t). A trader from Linyi said, “Weaker LLDPE futures somehow has affected the sentiment and buyers tend to hold back their purchases waiting to be certain about the market direction in the near term. However, we believed that the current firming trend would push through the month of March considering sharp gains in the upstream markets.”

Another trader in Shanghai added, “Some of our regular customers have informed that they might postpone their purchases to next week due to the concern over the speed of the price increases recently. We are offering Iranian HDPE film cargoes at $1160-1170/t FCA China, but buyers are not showing much interest. We think the market needs more time to accept this level.”

Import homo-PP to China has also gained $20-30/t compared to last week to reach $900-950/t CFR China, LC AS term. A major Saudi Arabia producer elevates their prices by $30/t in the latest opening to reach $900/t said, “We are not having much quantity this month and we expect the Chinese PP market to continue the firming trend in the near term. This therefore might cushion the Southeast Asian PP market to breech the $1000/t threshold.”

In Southeast Asia PE market, ethylene cost surged up significantly last Friday fuelling sellers’ intention to lift their offers. A regional producer sold HDPE film last week to Vietnam at $1140/t CIF term said, “Higher upstream costs act as an assurance factor to buyers that the firming trend is real, and today we received a good number of inquiries from overseas customers for HDPE grades. We are planning to announce new offer with at least $20/t higher than last week.” Within the local markets, a major local marker in Indonesia has opened new offers for the week with $20/t higher for LLDPE film, while keeping other grades unchanged from last week. Locally held PE cargoes in Vietnam have also gained ground following the international trend. A trader adjusted LLPDE film offers up VND400,000/t ($18/t) on the first trading day of the week said, “Domestic PP and PE supply is not as tight now, however, traders are trying to regulate their sales quantity with hope seeing better margins in the near term. The bright side is that buyers are accepting the new price levels without any hesitation.”

Most of international suppliers have yet to reveal their new offers for PP cargoes today, however, the general expectation is that PP market still has room to move higher in the coming days. Indonesian players received PP offers from a major Thailand maker with $10-20/t firmer than last week at $1020/t for homo-PP yarn and injection, $1040/t for PP film and $1080/t for PP block copolymer, all on CIF Indonesia, LC AS term. In spite of a clear upward movement, many players are expressing more cautious views regarding the recent market development with one source commented, “The PP prices are moving up too quickly compared to the propylene cost, which worried us a little. With Korea’s SK Advanced starting up its new propane dehydrogenation (PDH) unit in Ulsan in the coming weeks and Indonesia’s Chandra Asri to ramp up production rate at its naphtha cracker to 100% by end of this month, propylene supply in the region should be eased. This might cap the PP market from any significant hike.”

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