Asia Daily PP and PE Overview 4 July 2017

In China, futures market makes a drastic over-turn today, loosing significantly despite strong energy market. September delivery contract for PP slipped CNY173/ton ($25/ton) to reach CNY7798/ton ($980/ton without VAT). LLDPE contract plunged CNY235/ton ($35/ton) to close at CNY8820/ton ($1109/ton without VAT).

Trading activities in local market slow down to a certain extent as plunging futures market eliminate arbitrage opportunities for traders. Except for LDPE cargoes still gain CNY50/ton ($7/ton) from the previous day, most other PP and PE grade witness a drop of CNY100/ton ($14/ton). A trader reported, “We still received good number of purchase inquiries for LDPE heavy duty. Local producers have yet to respond to the latest development in the futures trade with hope that market is heading for stabilization. However, buyers are doubting the near term outlook.”

In the import market, the metallocene PE market is under pressure of lengthy supply and sluggish buying interest condition. Major Singaporean marker therefore implemented $40/ton reduction on their mPE cargoes to China from last month, to reach $1230-1250/ton CFR China, LC AS term. A buyer added, “As a compensation for loses incurred on mPE parcels, we are entitled to purchase HDPE injection from the maker at below $1000/ton threshold, shipment from Saudi Arabia plant. We are still considering now.”

Import PP market sees little movement with homo-PP injection cargoes offered at $980/ton for USA origin, $970-980/ton for Saudi Arabia origin, CFR China term. Players explained that import PP market did not experience any significant drop in the past month despite weak demand because of the reduced cargoes arrival, which keep supply in control. “Second half of the year appears to be less optimistic as well,” a market source added.  

In Southeast Asia, the market remains slow and it appears that dutiable materials, including PP and PE, are facing difficulties in attracting buying interest in Indonesia. Several overseas suppliers are still carrying July allocation on hand despite large reduction recorded from the previous month.

An international trader offered PE to Indonesia at $1120/ton for LLDPE film and $1090/ton for HDPE film, CIF, LC AS term said, “We are willing to give additional $10-20/ton discount on deals, yet our buyers are not very interested. We are discussing with principal supplier regarding the condition and might have to concede to deeper price cut to stimulate demand.”

Meanwhile, the number of transaction for import PE to Vietnam is not much better, though buyers here started to raise expectation that prices are nearing the bottom. A major Saudi Arabia producer withdrew initial offers for LLDPE film at $1080/ton CIF Vietnam and implemented $10/ton hike to bring prices to $1090/ton with the same term. A buyer commented, “We planed to purchase 500 tons, but decided to cut down the quantity after the producer adjust prices. There is no strong support for a rebound at the moment, hence we prefer to be cautious.” The source also reported to have purchased Thailand LLDPE film at $1080/ton CIF Vietnam, LC AS term.

The regional PP market is full of confusion. While several suppliers refused to give additional discounts, others are showing loosened stance on prices. However, demand across Southeast Asia show no significant up-tick though Malaysian and Indonesian players have resumed working.

Philippines and Singaporean suppliers lifted import homo-PP prices to above the $1100/ton threshold to Indonesia, which bumped into stiff buyer resistance. “Local traders are selling at $1125/ton FD Indonesia, excluding VAT, cash term, which is more competitive than import materials. We continue to source needed quantity from domestic sellers at the moment.”

The homo-PP market in Thailand appears to be under pressure due the psychological effect of the new start up at IRPC’s 300,000 tons/year new PP plant this July, which would make the company the second largest PP maker in Southeast Asia with total production output of 775,000 tons/year. A trader offered homo-PP at THB37,500/ton ($1100/ton) without VAT, FD Thailand, cash term said, “Supply is comfortable despite the recent shutdown at SCG’s plant. We heard that IRPC would produce PP film upon the start up, yet buyers still prefer to wait and see. Market is very quiet here.”