Asia Daily PP and PE Overview 14 June 2017

In China, futures market extended the weakening trend as September delivery contract for both PP and LLDPE settled lower. PP futures closed at CNY7720/ton ($970/ton without VAT), down CNY97/ton ($14/ton) from the previous session. LLDPE contract fell CNY165/ton ($24/ton) at CNY8925/ton ($1122/ton without VAT).

Sentiment in the domestic spot market is badly affected by continuous falling futures trade and sellers are loosening their stance on the available cargoes, by offering CNY50/ton ($7/ton) discount on both PP and PE parcels. A trader informed, “We only managed to conclude a small quantity today as buyers have replenished sufficient in the previous session. We think that spot and futures market are increasingly interdependent due to the inter-transaction activities. This is not very healthy for spot trading.”

Chinese players are expecting demand in Xiamen area to remain mediocre in the coming month due to stricter environmental regulation ahead of the China's 9th BRICS Summit 2017 held on 3-5 September.

In the import market, buyers are placing bid for Thailand HDPE film at $30/ton below initial offers, at $1080/ton CFR China, LC AS term, however the supplier refused to accept such low prices at the moment. “The cargoes off take rate is rather slow though we offered special discount for volume 500 tons and above. Iranian material continue to pour in at competitive prices and putting extra pressure on the market,” a distributor commented.

The import PP market in China remain subdue with very limited number of fresh offers observed. Mostly Chinese traders are pushing to export both regular and coal based homo-PP to the near by Southeast Asian market at some discount compared to earlier this week, reflecting the weakness in domestic ground.

In Southeast Asia, market is rather calm as the week proceeds and sellers implemented diverged pricing decision, causing great confusion among buyers. In fact, major Thailand producer announced fresh weekly PP and HDPE prices to Vietnam and Indonesia with $20-30/ton hike compared to last month, claiming limited availability stemming from several production issues. However, buyers in these countries are not very receptive about the hike claiming that supply from other sources is still comfortable while ethylene and propylene remain low. Many customers are still in the wait and see position, hoping to obtain lower prices in the coming week. A source close to the producer informed, “We only have few hundred tons of materials this time. The PE market is weak at the moment, yet we are not in rush to deplete the cargoes.”

In contrast, Philippines materials offered to Vietnam see $10-20/ton reduction reaching $1070-1080/ton for homo-PP and $1100/ton for HDPE film, CIF Vietnam, LC AS term.  An international trader commented, “Buyers are still asking for additional discount, however we could not fulfill at the moment. The near term market outlook is rather cloudy for PE.”

It does appear that PP market might hold firmer position in the immediate term with very limited offers for Middle Eastern cargoes available. Regional and overseas suppliers also reported to have received better number of inquiries for homo-PP with a Middle Eastern producer said, “We have comfortable supply for PE, however our regular customers are only asking for homo-PP. We are currently monitoring market development before setting July offers.”

Meanwhile, trading activities in domestic Indonesia are quieter today, as buyers here have purchased much of the needed quantity. “Traders are limiting the selling quantity by maximum 200 tons per customers for both PP and PE. Market is now calmer and we think there might be very limited transaction in the coming week,” a market source informed.