Asia Daily PP and PE Overview 2 June 2017

In China, futures prices plunged un-expectedly on the final trading day of the week. September delivery contract for PP fell CNY233/ton ($34/ton) to reach CNY7674/ton ($963/ton without VAT). LLDPE contract slipped CNY210/ton ($31/ton) to close at CNY8930/ton ($1121/ton without VAT).

Local traders started giving small discount of CNY50/ton ($7/ton) on spot PP and PE cargoes as sentiment remains sluggish after players returned from the Dragon Boat Festival. Players reported tight availability for LLDPE film stemming from several shutdowns in the country. A trader sold Iranians LLDPE film at CNY8950/ton ($1123/ton without VAT), EXW China, cash term said, “Buyers are only interested in low price cargoes. Our prices are about CNY100/ton ($14/ton) below market levels at the moment. We are not expecting any up-tick in demand in the near term, yet we hope that limited supply would support the general sentiment for LLDPE market.”

In the import ground, the strengthened Chinese Yuan does not seem to provide any significant support. Traders are offering PE cargoes from various origins at $10-20/ton below respective producer’s price list and still facing resistance. For instant, new HDPE yarn offers from an Indian producer stand at 1140-1150/ton CFR China, LC AS term, yet interested buyers could obtain the cargoes in the distribution market at $1130/ton LC 90 days term. A Shanghai based trader commented, “We are not seeing many factors that support market in June, hence we are very cautious about keeping stock.”

In the PP market, USA PP block copolymer emerged at bonded warehouse at $980/ton with a trader informed, “We plan to re-export these cargoes to Southeast Asia at about $40/ton higher.” The source also added that they are unable to obtain competitive Chinese homo-PP cargoes to export to Southeast Asia in recent week.

In Southeast Asia, market remains mostly unchanged from the previous trading day with regional buyers are actively requesting for offers but reluctance to accept higher prices, especially for import homo-PP. However, international suppliers are taking very firm stance on their cargoes on the back of strong upstream costs. A Saudi Arabia producer sold homo-PP cargoes to Indonesia at $1060/ton CIF, LC AS term said, “Many of our customers are still placing bids at $1030/ton, yet we can’t fulfil such requirement. At the moment we only manage to close a small number of deals, however, market is set to move higher in the coming week.” The producer reported to have regular allocation for this month.

Meanwhile, Vietnamese buyers reported receiving more homo-PP offers from various international suppliers toward the end of the week, mostly at stable to firmer levels compared to last week. Prices below the $1050/ton threshold are gradually disappearing, yet buyers here are not showing high acceptance level toward new offers. Saudi Arabia homo-PP by the final two trading days of the week mostly stand in the range $1060-1070/ton CIF Vietnam, LC AS term with the lower end represent deal level. These prices however are facing stiff resistance from Vietnamese buyers, especially local traders, who are encountering slower than usual domestic demand. A trader commented, “We did not make any purchases at the latest price levels since the demand condition does not provide any support. We would continue to wait and see.”

It is also a good sign that Indonesian suppliers are signalling the intention to set prices firmer in the near term after nine weeks of continuous cutting offers to domestic buyers. “We are totally free from any inventory pressure now and we might lift offers despite slack demand amid Ramadan season,” a domestic producer informed.

Most businesses for PE have been concluded and there are very limited offers observed on the final trading day of the week. The market is in the tug of war as buyers continue to press for lower prices on the back of weakening ethylene costs while sellers are attempting to avoid cutting offers below the $1100/ton mark. In fact, ethylene costs plunged another $20/ton on Thursday on amble supply and weak demand. Industry participant are hoping for a more stabilizing condition in the coming days as downstream styrene monomer market regain some strength recently.