Asia Daily PP and PE Overview 9 June 2017

In China, futures market inched up slightly on the final trading day of the week with both contract for PP and LLDPE gained CNY45/ton ($7/ton). September delivery contract for PP closed at CNY7720/ton ($970/ton without VAT) while LLDPE close at CNY8930/ton ($1122/ton without VAT).

Domestic spot market witness better number of deals though most buyers are still sourcing base on need basis. Traders who active in doing arbitrage between spot and futures are concentrating in depleting cargoes at the moment, as confident in near term outlook remain low. A trader in northern China commented, “We are diverting our LLDPE film cargoes to eastern area where demand is much better to earn price gap of CNY300/ton ($44/ton). Shaanxi Zhongmei Yulin Energy & Chemical Co Ltd has switched its 300,000 tons/year HDPE/LLDPE swing unit to produce LLDPE, which might ease local supply soon. Therefore, we prefer to concentrate on selling.”

In the import market, tightening banking regulation does not seem to hinder Iranian cargoes from entering China with several buyers inform that instead of making TT payment in USD, they could open LC by using EUR. A buyer added, “We are more concern about Qatar cargoes as it seems delivery for this origin might face some delay. The impact on the market needs more time to show, as June and July is still the slow season.”

Several USA origin HDPE blow molding cargoes are offered at $1000/ton CFR China, LC AS term, however there are very limited number of deal reported due to large buyer and seller price gap. “We would only start buying this cargoes if prices reach three digit,” a market source said.

Import PP market is rather mixed. Most mainstream origins, especially Middle Eastern cargoes are hard to come by these days while traders are holding very firm stance on the remaining on hand quantity. On the other hand, Russian homo-PP yarn is concluded at $950/ton CFR China term. A converter purchased the cargoes said, “Our supplier agreed to $20/ton discount from last week and we pick up some quantity as Saudi material are offered at much higher levels - $1020/ton CFR China.”

In Southeast Asia, the general sentiment remains unchanged from the previous trading day, though couple of Saudi Arabia producer announced new homo-PP prices to Vietnam and Indonesia with increases of up to $25/ton from last week. Buyers are not responding very positively to the latest offers.

In fact, the maker announce weekly offers at $1080/ton to Vietnam, a $10/ton increased from last week and several buyers have placed bids at $1040/ton with the same term. A local trader said, “Our supplier insists on only $20/ton discount from initial offers at $1060/ton to close deals; however, we find it unattractive at the current upstream costs and energy complex.” May other buyers in the country did not proceed with purchases at discount prices claiming high risk, as the cargoes would only arrive by September.

The same producer lifted offers to Indonesia by $25/ton week on week, reaching $1090/ton for homo-PP yarn and injection, CIF, LC AS term. “We sold a good quantity in the previous week and at the latest offers, our customers are not very interested. This is not a good sign for a sustainable firming trend,” a distributor commented.

International sellers are hoping that demand for import cargoes in Indonesia would pick up soon as a number of converters have obtained the import permission and a government entitlement to reduced import duties. This scheme is called Bea masuk ditanggung pemerintah (BMDTP) or Import Duty Borne by the Government. Several buyers informed CommoPlast of their eligibility to purchase Taiwan, Saudi Arabia, Qatar, UAE and China materials at 0 per cent import duties for a fixed quantity per annum.

The regional PE market persists in the sluggish condition as buyers continue to wait for prices below the $1100/ton threshold. An international trader offered Indian LLDPE film at $1100-1110/ton CIF Vietnam, LC AS term complained about inactive transaction. The source blamed competitive South Korean LLDPE film to be the main source of pressure, “South Korean LLDPE film conclude earlier this week at $1090-1095/ton to Vietnam has created the benchmark for the market. Buyers are now asking for similar to lower levels. We have not been able to close any deal this week.”