Asia Daily PP and PE Overview 18 July 2017

In China, the momentum in futures market is slowing down though both contracts for September delivery remain on the positive side. PP futures inched CNY13/ton ($2/ton) higher from yesterday to reach CNY8193/ton ($1036/ton without VAT). LLDPE contract added only CNY5/ton ($1/ton) at CNY9220/ton $1166/ton without VAT).

Domestic spot PP and PE prices added another CNY50-100/ton ($7-14/ton) from the previous trading day. The effect is not as positive as expected. Continuous firming spot offers shrinks the price gap with futures trading, making it less attractive for arbitrage traders. “Therefore, trading activities slightly drop today, yet the number of deals concluded remain satisfactory,” a trader commented. The source reported to have received better inquiries for LDPE film from domestic buyers.

In the import market, international suppliers do not seem to have renewed interest in offering homo-PP to China as most other neighboring markets offer better margins. An international supplier offered Omani homo-PP injection at $1020/ton CFR China, LC AS term earlier this week said, “We then decided to divert all the quantity to Vietnam, where buyers accepted at $1060/ton CIF term. We have not been active in selling import PP to China for couple of months now.”

More overseas PE suppliers implemented hike on their cargoes while Iranian sellers planned to take firmer stance on the back of tightening supply. An Iranian producer said, “Due to summer and cracker shutdown, our PE plants are operating at low rate. This allow us to achieve about $20/ton hike target for PE cargoes this week, closing deals at $1130/ton for LDPE film and $1100/ton for HDPE film, CFR China, TT in advance term.” The source added that supply would only come back to normal in September.       

 In Southeast Asia, the firming trend is becoming clearer and it appears that regional buyers are gradually accepting small to moderate price hike for both PP and PE. The cautious sentiment is still thick though limited availability is having its way.

A major Saudi Arabia producer announced fresh weekly homo-PP offers to Vietnam with $30/ton increased from done-deal levels last week, reaching $1080/ton CIF Vietnam, LC AS term. Despite resistance from buyers, the producer shows no intention to enter any negotiation claiming healthier margins achieved in other markets. An international trader offers the cargoes on behalf of the producer reported, “Available quantity is very limited and we are firm on the offers. Most non-dutiable cargoes sold in the previous week at competitive prices have not repeated this week and with the absence of Chinese materials, we believed that market shall accept the hike.” It is heard that a deal is closed at $1070/ton level CIF Vietnam, LC AS term. This would undermine the possibility of lower bids being accepted by sellers.

In the regional PE market, import LLDPE film to Indonesia gained $20-30/ton compared to earlier this month with offers from Middle Eastern suppliers mostly stand in the range $1095-1120/ton CIF Indonesia, LC AS term. “Prices at the level $1070-1080/ton are no longer available, yet we are not expecting any significant firm up,” an Indonesian buyer said. To support such claim, the source pointed to competitive domestic cargoes available at the moment. CommoPlast data showed that average local LLDPE film prices are only about $20/ton higher than import, discouraging interest for overseas cargoes.

Meanwhile, in Vietnam, an international trader claimed to have sold Indian LLDPE film at $1060/ton CIF Vietnam, LC AS term, which is about $30/ton increased from the last deals reported earlier last week. The trader added, “Buyers are resisting the hike claiming weak local ground. However, we believed that market is set to continue the uptrend.” Very few offers for HDPE observed.

Discussion is going on that limited supply for HDPE film stemming from a series of plant shutdown plays an important role in lifting the market this time, and a jump in LLDPE film price is a spill-over effect. As a result, players believed that the upside for LLDPE film is limited.