Asia Daily PP and PE Overview 6 June 2016

In China, futures market remains soft moving to the second trading session of the week. September delivery contract for LLDPE edged CNY35/ton ($5/ton) lower to reach CNY8895/ton ($1118/ton without VAT). PP contract only added CNY2/ton ($0.3/ton) at CNY7676/ton ($965/ton without VAT).

Demand in domestic spot market remains relatively soft with buyers sourcing material mostly on need basis. Local producers continue to offers volume discount in the range CNY50-100/ton ($7-14/ton) for both PP and PE to encourage purchases. It is interesting that local LLDPE film market is on the firming trend thanks to tightened domestic supply while most other grades, including homo-PP, HDPE and LDPE are moving south. A market source added, “Prices could have gained more strength on the back of tight supply, however, falling ethylene costs undermined the situation. We hope that the market could persist the current condition throughout June, as demand is not there to create any significant pull.”

In the import market, Middle Eastern suppliers decided to step back on their LLDPE film offers, brining latest prices to $1080/ton CFR China, LC AS term for regular origin. A trader said, “Only Saudi cargoes at bonded warehouse are still priced above the $1100/ton at this moment. Despite stronger Chinese Yuan, demand is still not healthy.” It is observed that import and local LLDPE film markets are moving in diverged direction.

There are several deals reported for Russian homo-PP at $970-980/ton CFR China, LC AS term, yet it also appears that discussion is rather limited. Players are actively participating in the “One day trip” business to export local materials to Hong Kong and bring back the cargoes within the day to gain the tax exemption rate. This also explained to why international suppliers are showing less interest in China recently.    

In Southeast Asia, there is a growing number of new offers for Chinese homo-PP, both regular and coal based, observed in Vietnam. This could depict a weak demand condition within China market, which encourages suppliers to export their material. However, the number of deals is rather limited as buyer confidence is rocked by unexpected down turn in upstream propylene costs.

An international trader sold Chinese regular homo-PP at $1060/ton CIF Vietnam, LC AS term said, “We offered $10/ton discount but our customers only make a small purchases. Market cycle is repeating at the moment and if Chinese cargoes continue to come in, the pressure on prices would be stronger.” Meanwhile, there are very limited offers for Middle Eastern homo-PP cargoes reported since beginning of the week.

On the other hand, holiday mood is weighting down on the general sentiment in Indonesia. Buyers in the country are not showing any eager to make purchases as the Ramadan celebration draw near. “Road ban would start by 18 June and we have already replenished sufficient material since last week. At the moment, we prefer to take cautious stance, especially with the latest movement in the upstream market.”

The regional PE market is still actively discussing the impact of the latest political tension in between the GCC that could possibly impact the shipment from Qatar. However, up to this moment business is still as usual for Qatar based petrochemical producer with a source said, “We have not been informed about any delay in shipment from the plant side and therefore we still able to take order from customers.” Industry experts claim that shipment from Qatar should only be affected in term of the voyage time, as shippers need to avoid certain routes. Qatar is the largest LNG exporter in the world and produces mainly polyethylene (PE). Its largest PE export destination is China and with reduced accessibility to neighboring GCC market, Qatari producers might allocate more material to Asia.

At the meantime, traders are racing to offer discount to speed up sales process, which unknowingly pushing buyers further to the sideline. Trader offered Philippines HDPE film at $20/ton lower than last week to Vietnam at $1110/ton term is facing stiff competition and Uzbekistan HDPE film concluded at $1090/ton with the same term. “We could not move large quantity this week and it appears that this condition might persist in the near term,” a trader commented. Indian LLDPE film also appear at $1100/ton CIF Vietnam, a $70/ton drop week on week basis.