Asia Daily PP and PE Overview 19 June 2017

In China, futures market firmed up slightly on the first trading of the week though the extent of increment remained very limited. September delivery contract for PP gained CNY18/ton ($3/ton) at CNY7708/ton while LLDPE contract added CNY50/ton ($7/ton) to close at CNY8910/ton ($1118/ton without VAT).

There are very limited numbers of deals reported in the domestic spot market as traders hold offers steady from last Friday. It appears that local PP and PE market in China does lack of fundamental support to regain strength. Many converters in the PP sector including BOPP film makers are operating at lower rate, which required less inventories than usual. “And therefore, buyers only purchase on need basis in recent month,” a trader commented. Besides, the recent tightening liquidity also affected the general activities. Moving toward July, sellers again hoping that the start of green house season would stimulate the demand for LLDPE and LDPE film; however, market direction remains cloudy.

In the import market, major Saudi Arabia producer stepped back on LLDPE film to China by $20/ton after several weeks of holding firm on their cargoes, hoping that limited local supply would encourage replenishment activities in the import ground. A trader commented, “Demand is just too weak to support the market and we fear of further reduction in the near term despite firmer futures market. We conceded to another $10/ton discount and only manage to conclude some small deals.”

Meanwhile, a majority of import homo-PP offers to China on the first trading day of the week stand below the $1000/ton threshold, ranging $950-980/ton CFR China, LC 0-90 days term. International traders are reporting that demand for import homo-PP in India at the moment is relatively healthier than other Asian markets, from which very few sellers are active in China in recent weeks. A BOPP sheet maker said, “Our end product inventory is very high as it is slow season now. We are spending more time on deloping new products and market, hence might not replenish too much material until end of July.”

There are very limited transaction reported in Southeast Asia market on the first trading day of the week though a major regional producer announced July PP and PE prices with reduction to Indonesia. The maker conceded to up to $30/ton reduction on PP cargoes and $40/ton on LDPE and $20/ton on HDPE. This is the fourth straight month the producer cut offers yet buying interest in Indonesia seems rather sluggish.

An Indonesian buyer informed, “Our company will start to off for Ramadan from 22 June to 1 July, therefore we are not planning to make large replenishment this time. Besides, we are covered until early August. We are planning to procure a small quantity to arrive by first half of August if the supplier agree to additional discount.”

Traders sold Philippines homo-PP to Indonesia in the previous week at $1080-1100/ton CIF, LC AS term are now lifting the offers to $1120/ton with the same term claiming lower availability. An international trader offered the cargoes said, “Buyers have yet to accept the new prices, however with firmer local ground now that import material seem more competitive. We hope to close some deals at least at stable levels before Indonesia market go off for holidays.” Most other suppliers are maintaining import homo-PP prices unchanged from last week to the region ahead of the Eid al-Fitr holidays.

The regional PE market is rather slow despite stabilising upstream costs. Most buyers are still hoping to achieve additional discount in the near term, pointing to comfortable supply amid traditional off-peak season for flexible packaging sector. Besides, with Indonesian and Malaysian customers departing for the Eid al-Fitr holidays by end of the week, which took away a large portion of demand, pressure is likely to build up.

A regional trader said, “We really concern over the near term market outlook since the energy complex does not seem to provide any support to the general sentiment. Major international producers would announce fresh prices soon and we are waiting on the side-line at the moment.”

Another regional producer lifted HDPE prices in the previous week due to reduced allocation stemming from production issues added, “We were not able to achieve our hike target due to stiff competition from other suppliers. We therefore plan to hold prices unchanged this week to monitor further development.”