Asia Daily PP and PE Overview 24 May 2017

In China, futures market continues to decline with September delivery contract for PP loses CNY84/ton ($12/ton) from the previous session to close at CNY8013/ton ($993/ton without VAT). LLDE contract slipped CNY95/ton ($14/ton) to reach CNY9205/ton ($1140/ton without VAT).

There are very limited trading activities in local spot market today though no major price cut reported, as domestic producers are not facing inventories pressure. “Sentiment weakened visibly as most converters have replenished sufficient material over the past week while falling futures market eliminated the arbitrage opportunity, discouraging traders to pick up spot cargoes. Distribution market is offering small discount for both PP and PE, however, the number of deal conclude just really low,” a trader commented.

Meeting with several large scale converter in Hangzhou area today, it is found that end product businesses are not very strong at the moment with a woven bag maker said, “It is traditional slow season at the moment. We have comfortable inventories on hand, hence might temporary side-line to monitor further movement.” The source mainly export their end products.

Meanwhile, BOPP sheet makers are complaining about thin profit margin as many have cut end product prices to attract new orders. “Therefore, we are very particular about raw material prices these days. We are hoping that the recent trade initiative by the government could provide support to the market by the second half of the year.”

In Southeast Asia, more overseas suppliers announce June shipment offers to the region at softer levels from last month. Buyers are pressurizing for additional discounts as ethylene costs based on CFR Southeast Asia term breached below the psychological benchmark of $1000/ton. Several deals for Korean LLDPE film are reported in Vietnam at $1120/ton CIF, LC AS term today while other Middle Eastern suppliers are still working on bid received from buyers.

A Vietnamese buyer purchased Korean LLDPE film at the mentioned price said, “We think this price is relatively competitive at the current market level. We are also discussing with other suppliers to make additional replenishment at similar prices.” Meanwhile, many other buyers are not confident enough to make purchases claiming that PE market might witness additional reduction in the near term if ethylene costs continue to fall. Industry participants do think that ethylene in Asia still has room for further reduction as most derivatives; including styrene monomers are suffering from negative margins at the moment.

Import offers for homo-PP to Vietnam is very limited and players informed that homo-PP yarn availability remain pretty tight. Couple of traders reported to have sold out available quantity for Saudi origin cargoes at $1040/ton CIF Vietnam, LC AS term. “At the moment, we only have left some quantity for homo-PP injection grade and buyers are placing bids at $1030/ton. We are waiting for feedback from principal suppliers,” a trader informed.

Within Indonesia, buying interest for both local and import materials is picking up after suppliers conceded to additional discount. Singaporean homo-PP concluded pretty well at the range $1065-1070/ton CIF Indonesia, LC AS term today. A buyer ordered few hundreds tons of this cargo said, “Our supplier is only able to confirm part of the order, the remaining quantity would only be confirmed by end of the week. The supplier has almost sold out the allocation this week. We are also talking to Thai suppliers to make additional purchases.”

Besides, it is also noticed that Korean suppliers are very active in Indonesia recently after the ASEAN – South Korea Free Trade Agreement comes into effect in this market, which entitle imported Korean PP block copolymer to zero (0) per cent custom duties. Other PP and PE grades from this origin are subjected to only 5 percent import duties to Indonesia. Indonesian buyers are attracted to the cargoes amid competitive penetration pricing schemes.