Asia Daily PP and PE Overview 8 June 2017

In China, futures market regains some strength and settle volatile trading day on firmer notes. PP contract for September delivery increased CNY34/ton ($5/ton) to reach CNY7730/ton ($972/ton without VAT). LLDPE contract inched CNY45/ton ($7/ton) higher to close at CNY8915/ton ($1121/ton without VAT).

Trading activities in domestic spot market remains acceptable to traders though further discount CNY50-100/ton ($7-15/ton) are reported on PP, LDPE and HDPE cargoes. It appears that converters have digested materials purchased before the holidays and returning to replenish the needed quantity. Again, the question of sustainability prevailed other issues as a large part of flexible packaging sector is in off-peak season. “Therefore, we are not planning to withhold our offers even with firmer futures market. Customers are more interested in LLDPE film cargoes given tight supply in domestic ground,” a trader commented.

In the import market, there are some rumours that major Indian producer lifted homo-PP offers to the country by $20/ton from last week to reach $1000/ton CFR China, LC 30 days term. However, it is not confirmed at the time this report is published.   

In Southeast Asia, the general sentiment toward the end of the week remains heavy as buyers are evaluating the impact of Middle East conflict on supply. Qatari major PE maker and distributor – Muntajat has made an official announcement to its customer informing that it has engaged more than 18 shipping lines and rerouted shipment to ensure regular allocation to the market. There might be some delay in delivery as a result of changing routes, however, the impact on overall supply might be mitigated. Buyers are now raising concern on other related issue. A market source said, “Buyers in Saudi Arabia, Jordan, Egypt and UAE might need to search for alternative material now that Qatari cargoes are not allowed to enter these countries. This would indicate a possibility of lacking availability in Asia for certain grades as other Middle Eastern producers might turn to support demand in respective domestic market.”

Another market source added, “We might not see the immediate impact as Asian market is amid traditional slow season at the moment. We continue to negotiate with our suppliers to make some replenishment within June.” The source added that major South Korean makers are actively collecting bids for LLDPE film cargoes in Vietnam with indication of comfortable availability. Several buyers have expressed buy ideas at $1080-1090/ton CIF Vietnam, LC AS term – way below the producer sell idea levels. Malaysian converters, who exports end product mainly to Japan also eyeing import LLDPE film cargoes below $1100/ton threshold to make large replenishment.  

There are also very limited number of transaction in the PP market with propylene costs fell three days in a row that dented the buyer confidence in the immatured revival trend. “Market is slightly softer now after just a brief week of firming up. Our biggest concern now is would the down trend continue in the coming week?” a regional buyer commented.

Indonesian buyers were informed that supply for PP thermoforming from a major Thailand maker for July will be limited due to production schedule changed. Vietnamese buyers also received similar announcement for HDPE supply from the same producer. “Therefore, we are making some purchases this week from local market,” an Indonesian customer said. “Domestic supply is also tightening as domestic maker curtailed operation rate and focus on contract business,” the source added.

At the meantime, Thailand’s IRPC plan to start up its new PP plant in July after a major expansion that lifted the output by 63%, to 775,000 tons annually. This makes IRPC the second largest PP maker in Southeast Asia. In addition, Vietnam’s Nghi Son Petrochemical would also conduct test run at the 370,000 tons/year PP unit by October this year, but commercial product might only start by early 2018.