Asia Daily PP and PE Overview 25 May 2017

In China, futures market persists on the soft note with no significant movement recorded. September delivery contract for PP added CNY67/ton ($10/ton) to close at CNY8084/ton ($1001/ton without VAT). LLDPE contract settled at CNY9190/ton ($1138/ton without VAT), dropped CNY10/ton ($1.4/ton) from yesterday.

Trading activities in domestic spot market is rather sluggish, as buyers have already purchased sufficient materials. Sentiment might remain weak in the coming week due to the Dragon Boat Festival that shorten the next trading week by a half. As a result, several traders are offering CNY50/ton ($7/ton) discount on both PP and PE cargoes. A market source said, “Players are entering holiday mood. We hope market would improve by early June as buyers might need to re-stock material after the long weekend holidays.”

In the import market, Thai major attempted to increase HDPE offers earlier this week has now down adjusted prices by $10/ton, bringing latest offers to $1120/ton for HDPE film and $1130/ton for HDPE yarn, CFR China, LC AS term. Buying interest for import material is also not very strong. “It involved more risk to buy Iranian material now as we have to pay 100 per cent TT in advance. This could tighten our cash flow if purchase in large quantity. Hence, we might need to source either from other suppliers or from local market,” a trader commented.

Middle Eastern suppliers have also announced fresh prices to the country with a producer claimed to have sold some quantity of LLDPE film at $1120/ton CFR China, LC AS term this week. “The PE market is generally facing pressure, however we might hold our prices to other market since Chinese buyers have accepted this level,” a producer source added.

In Southeast Asia, regional buyers are still in negotiation for additional discount for import PE cargoes after several overseas producers announced June shipment offers with reduction in the previous trading days. Despite the fact that a major Saudi Arabia producer takes firm stance on their PE cargoes to Vietnam, refusing any additional discount claiming satisfactory sales in China; Vietnamese buyers are just not convinced to proceed with purchases.

A buyer commented, “Import LLDPE film to Vietnam at the level $1120-1130/ton CIF term is becoming popular at the moment and we fear of further reduction in the coming month if ethylene costs remain weak. Therefore, with a Saudi Arabia producer insist on $1150/ton for LLDPE film, we just could not accept. We prefer to take wait and see stance.” Many other buyers in the country are sharing similar comment.

Though ethylene prices in Asia temporarily halt the downtrend on Wednesday closing, industry experts believed that there is still room for further reduction amid increasing supply and weak demand from most ethylene derivatives. To put more weight on the sentiment, Iranian PE cargoes emerged in Vietnam today after plunging in China earlier this week. Vietnamese buyers reported receiving offers for this origin at $1100/ton for LLDPE film and $1120/ton for HDPE film, all based on CFR Vietnam, LC AS term. Both grades concluded in China at the beginning of the week at around $1000/ton CFR China, TT in advance term. A trader said, “Vietnamese buyers are placing bids below the $1100/ton threshold and we are discussing with principal suppliers before setting final prices.” The source also added that they are having an allocation of approximate 1500 tons of Iranian HDPE film this time, which was originally set for China.

In the PP market, there are some signs that import homo-PP to Vietnam is set for a rebound. Several suppliers have implemented hike on their cargoes to the country today, though deals are reported at mostly unchanged levels from last week. South Africa homo-PP yarn offered at $45/ton increased from last week, reaching $1080/ton CIF Vietnam, LC AS term, shipment from Taiwan hub by early July. Middle Eastern homo-PP offered in the range $1060-1070/ton with the same term, though deals are at $1040-1050/ton for now. “And we hope local market could pick up too with PetroVietnam taking the PP unit off-stream for a 52 days maintenance work starting 5 June,” a local trader said.

Couple of question buyers are asking is that how much prices could firm up and how sustainable is the current trend. Both issues received less than positive respond.