Asia Daily PP and PE Overview 17 May 2017

In China, futures market extended the firming trend for the third session straight, though in much slower pace. September delivery contract for PP gained CNY43/ton ($6/ton) to close at CNY7765/ton ($962/ton without VAT). LLDPE contract only added CNY50/ton ($7/ton) to reach CNY9115/ton ($1129/ton without VAT).

It is interesting that demand in local spot market hold resilient throughout first three days of the week and local traders are attempting to implement another CNY50-100/ton ($7-14/ton) hike on spot PP and PE cargoes. Yet, players are discussing the concern over the near term outlook as most cargoes takers in recent days are traders, who are leveraging the arbitrage opportunity between spot and futures market. According to CommoPlast data, traders could gain a margin of approximate CNY200/ton ($29/ton) by directing LLDPE film cargoes from spot to futures market, provided they are able to source material at the lower end of the overall price range. Meeting with a Shanghai based trader during ChinaPlas, the source informed, “We are surprised with the market as we were initially expecting slower demand this week due to the exhibition. The number of deals concluded this week is satisfactory, just one factor we are concerning about is that most cargoes takers are still traders. Hence, possibly that if futures market witness downturn in the coming days, spot trading activities might loose steam.”

In the import market, PE suppliers introduced $10-20/ton increased on offers for Saudi LLDPE film to China, reaching $1120/ton CFR China, LC AS term. “We hope firmer local market could support our price decision,” an international trader said. The source also added that the number of deals concluded is very limited.

Meanwhile, Indian major also open fresh offers for homo-PP at $980/ton CFR China, LC 30 days for July shipment. The producer reportedly restarted all PP lines after maintenance work at operating at normal rate now. “Demand in China is really disappointing at the moment, however, we are still seeing healthy interest in local ground, hence we might hold firm on export offers,” a producer source commented. Chinese buyers also see limited homo-PP yarn supply at bonded warehouse recently.

In Southeast Asia, the general market condition remains relatively stable from the previous trading day except that demand for import homo-PP in Vietnam seems improving. A major Thailand producer re-opens offer for homo-PP to Vietnam after achieving satisfactory sales in the previous day, lifting $5/ton reaching $1060/ton CIF Vietnam, LC AS term. A source close to the producer informed, “We managed to conclude another 1000 tons of material today even with small price hike. Couple of others buyers are still sending in purchase inquiries, however, we have no remaining quantity.”

Another international trader sold Singaporean homo-PP yarn at $1060/ton CIF Vietnam term in the previous day added, “We are requesting for additional quantity at the same prices since many other customers are placing orders. Vietnamese buyers considered this cargo to be competitive since it is duty free. Market sentiment is improving thanks to firmer energy market and better buying interest in China.”

There are some market opinions that prices are nearing the bottom and might witness rebound in the coming weeks on restocking activities and couple of production issues. However, Southeast Asian buyers mostly preferred to take cautious stance concerning the sustainability of the recent improved in demand condition in China and the start of fasting month across Muslim market, which could slow down purchasing activities.

The regional PE market remains calm, primarily due to the lack of new offers from international suppliers. In addition, ethylene costs in Asia plunged to multi months low on Tuesday has had buyers bringing up the question on whether PE prices could continue to move lower?  A market source commented, “We think market might hold steady at the current level in the near term since PE has been traded at much lower than theoretical costs for some time now. Unless ethylene costs breach below the $1000/ton threshold.”