Asia Daily PP and PE Overview 23 May 2017

In China, futures market is loosing steam after nearly a week of continuous firming up. September delivery contract for PP softened CNY6/ton ($1/ton) to close at CNY8080/ton ($1000/ton without VAT). LLDPE contract slipped CNY35/ton ($5/ton) from previous trading day to reach CNY9275/ton ($1149/ton without VAT).

It appears that Chinese buyers have replenished much of needed quantity over the past week and prefer to wait on the side-line as futures market retreated. Yet, sellers are not facing pressure, in which market is not expecting large-scale price cut in the near term. “Local producers have already achieved sales target for the month, hence we think market might remain steady in the coming week. We do expect to see better demand condition by second half of the year since converters need to prepare for the Single Day during November.” Market sources, however, also raise concern that in the case demand does not pick up, prices might face greater pressure than the second quarter as most plants would resume operation after maintenance work.

In the import market, major Thailand producer cut LDPE film offers to the country by $20/ton week on week basis, at $1180/ton CFR China, LC AS term. The maker, yet, attempted to implement $10/ton hike on HDPE cargoes. Players commented that the drop in LDPE prices is a result of weak demand for this grade amid slow season and also pressure from newly started up plants in domestic ground. A trader said, “Domestic market is loosing steam and it appears that buyers have made sufficient replenishment over the past week. We do not expect the cargo pick up rate to be high since Iranian materials are available at bonded warehouse term at very competitive prices.”

In Southeast Asia, market sees more activities today as couple of major Middle Eastern producer announced fresh prices to the region. Fresh offers mostly indicated reduction from last month for both PP and PE, yet buyers are requesting for deeper discounts before concluding deals. A major Saudi Arabia producer announced PE offers to Vietnam with reduction of $50/ton for HDPE film and $60/ton for LLDPE film, bringing latest prices to $1130/ton and $1140-1150/ton respectively, CIF Vietnam, LC AS term. A buyer commented, “We have yet to place any bid, however, we think this level is above market acceptance.”

Another buyer reported to have received PE offers from another Saudi Arabia producer at $1130/ton for HDPE film and $1150/ton for LLDPE film, CIF Vietnam, LC AS term. The source expressed buy idea for both grades at $1100/ton and $1120/ton respectively. “Demand in local market is still weak at the moment. Prices might be nearing the bottom, however, we are yet to expect any rebound at the moment.”

More international producers are expected to announce new prices within this week and it appears that PE offers above the $1150/ton threshold are less likely to attract buying interest. Players are monitoring closely new development in the upstream ethylene market to gauge the likely direction in the downstream PE sector.

In the PP sector, there are very limited offers report in Vietnam since the week begins, though buyers here are generally expected prices has bottomed out. Meanwhile, offers to Indonesia continue to decline with Singaporean homo-PP yarn touches $1065/ton CIF Indonesia term today. A buyer in the country reported, “We are planning to make purchases, but requesting for another $5/ton discount. Overseas sellers continue to reduce offers and it does not look like market could rebound in the near term.”

A positive sign is that trading activities in local Indonesia are improving and better number of deal reported. Traders maintain offers for homo-PP yarn to local buyers at $1120/ton excluding VAT, FD Indonesia cash term with a buyer added, “However, suppliers are more open to negotiation now. It is likely that domestic material would reach the $1100/ton threshold in the coming week.”