Asia Daily PP and PE Overview 18 May 2017

In China, futures prices on Dalian Commodity Exchange settled higher for fourth straight session. September delivery contract for PP added another CNY84/ton ($12/ton) to close at CNY7837/ton ($970/ton without VAT). LLDPE contract also increased CNY90/ton ($13/ton) to reach CNY9205/ton ($1140/ton without VAT).

Healthy trading activities are observed in local spot market today though traders are very conservative about lifting offers. Spot prices for both PP and PE firmed up another CNY50-100/ton ($7-14/ton) from yesterday. A distributor commented, “We managed to deplete a considerable quantity of inventories this week to both local traders and converters. Market trend this year is rather unusual, however, we hope the current trend sustain in the coming month.”

Several converters in the flexible packaging sector have also reported better end product orders, yet only few plan larger purchases. “We prefer to monitor further movement before taking position. Market is heavily influenced by the geo-political recently and it is wise to be cautious,” a buyer commented.

In Southeast Asia, sentiment in the PP market continues to improve, as players believed that market has hit the bottom. Major Thailand producer claimed to have sold out all available quantity to Vietnam market this week at $1055-1060/ton CIF Vietnam, LC AS term. Source close to the company said, “We have concluded deal for the final 200 tons allocation to Vietnam market today. Couple of buyers are still asking for additional quantity, yet, we are unable to supply.”

Vietnamese buyers are also pointing to a possible tightening local supply in June and July as PetroVietnam start the 52 days maintenance shutdown at its 150,000 tons/year PP plant in Southern Vietnam on 5 June. “This could be one of the reasons that several traders are seeking for prompt import cargoes with hope local demand would pick up in the coming month. We remain cautious since weaker demand in other Muslim countries could keep the supply-demand balance.”

On the other hand, import offers for homo-PP to Indonesia hold relatively stable with non-dutiable cargoes stand in the range $1090-1100/ton CIF Indonesia, LC AS term. A buyer said, “Prices in Indonesia could be nearing the bottom too, however, we have no plan to make large purchases unless new orders for our end products come in, as we are not confident about the near term market outlook. Domestic materials are still competitive at the moment.”

There are very limited offers for PE observed across Southeast Asia except that a major Malaysian producer conceded to another $50/ton reduction from initial offers for LDPE film cargoes to Vietnam, to conclude deals at $1280-1290/ton CIF, LC AS term. With this, the producer has reduced a total of $80-90/ton in values for LDPE film month on month basis. Several deals are reported at the latest price levels though buyers are very cautious about the quantity with a buyer said, “It is very risky to buy large quantity this time since ethylene costs are plunging. We think that PE prices in general might continue to soften if ethylene costs breach below the $1000/ton mark.”

In fact, ethylene costs in Asia fell another $30/ton on Wednesday, marking a total drop of $90/ton for Fareast Asia and $60/ton for Southeast Asia this week. Industry expert believed that there is still room for further reduction in ethylene prices as market is lack of support from both supply and demand side.