Asia Daily PP and PE Overview 09 May 2017

In China, futures prices changed direction with September delivery contract for both PP and PE inched lower. PP contract losses CNY86/ton ($12/ton) while LLDPE decreases CNY75/ton ($11/ton). Both contracts settled at CNY7565/ton ($936/ton without VAT) and CNY8740/ton ($1081/ton without VAT) respectively.

Trading activities in domestic market remain mediocre as buyers only source material based on need basis. Suppliers cut spot prices for both PP and PE by CNY50-100/t ($7-14/ton) from yesterday to encourage buying interest and most deals concluded are reported at the lower end of the overall price range. A trader from Zhejiang is reportedly moving available cargoes to other market area, where margin is better. The source said, “We managed to conclude some quantity for locally held Saudi’s LLDPE film at CNY9300/ton ($1152/ton without VAT). We gain some margins and might continue this strategy in the coming days. May and June is normally slow season, therefore demand might not pick up so significantly.”

In the import market, international PE suppliers are also cutting offers to the country on the back of persistent price pressure from local material. Taiwanese, Thailand, USA and Iranian sellers have embraced the reduction. A Shanghai based trader offered Iranian HDPE blow molding at $1070/ton CFR China said, “Buyers are placing bids are very low levels as USA cargoes are traded at $40-50/ton cheaper. Our principal suppliers have been attempting to divert cargoes to other international market such as EU, since tightening banking regulation in China makes it difficult to open LC for Iranian material. However, China remains the largest consumption center, which mean we might need to cut prices further to speed up sales.”

In Southeast Asia, market is becoming more active with a good number of offers observed across the region. However, prices continue to track the softening trend. In fact, a major Saudi Arabia producer conceded to another $30/ton reduction on PE cargoes to Vietnam compared to deals concluded during late April, bringing latest prices for both HDPE and LLDPE film to $1120/ton CIF Vietnam, LC AS term.

Respond from players toward the new price levels is rather mixed. While several have purchased the cargoes believing that market is having very limited room for any further drastic reduction; others are still carrying great concern over the near term market outlook. A buyer said, “We prefer to be cautious though ethylene costs remain strong. Middle Eastern suppliers might want to reduce inventories before entering the Ramadan season.” Competitive USA’s HDPE blow moulding cargoes also show up in Vietnam this week.

Meanwhile, Indonesian buyers reported to have received LLDPE film offers from local distribution market at IDR455,000/ton ($34/ton) below producer’s price list despite the fact that domestic supply has yet to fully recover. On the other hand, converters in the flexible packaging sector are reporting of better end product businesses, “Just that the number of orders are only sufficient for our plant to run 80 per cent capacity. Therefore, we can’t stock up too much of raw material,” a buyer said.

New offers in the PP market are also following the stable to softer trend with Chinese coal based homo-PP reach new low in Vietnam, touching $1030/ton CIF Vietnam, LC AS term with form E. This has created a very unfavorable market condition for other overseas suppliers to maintain prices stable with support from limited availability. “Our Saudi Arabia producer therefore has agreed to conclude deal for homo-PP injection at $1040/ton CIF Vietnam though they refused this level in the previous week. We might only buy a small quantity while waiting for additional price cut,” a Vietnamese converter said.