Asia Daily PP and PE Overview 25 July 2017

In China, futures market is loosing steam after several winning sessions that boost the spot sentiment. September delivery contract for PP inched CNY15/ton ($2/ton) higher from the previous session to reach CNY8500/ton ($1076/ton without VAT). LLDPE contract loses CNY25/ton ($4/ton) to close at CNY9630/ton ($1219/ton without VAT).

Spot demand in local market is getting calmer though prices continue to firmer up. Arbitrage traders might suspend purchases if futures market slides in the coming days. It is heard that total PP and PE inventories at domestic producers’ warehouses have piled up to approximate 630,000 tons, yet it is still well below the psychological benchmark and free sellers from any pressure. “The risk is that very few maintenance shutdown in the coming month, which might boost cargoes availability. Hence, we are slowing down after purchased much of the needed quantity,” a trader commented.

In the import market, overseas suppliers continue putting effort to lift the trend with most Middle Eastern PE cargoes emerged at $10-20/ton higher than last week. Local LLDPE film regained the premium over import material, which believed to have driven the recent firming trend. A Qatar producer open offers at $1130/ton for LLDPE film and $1175/ton for LDPE film, CFR China, LC AS term. A trader received the offer said, “The supplier has sold out LLDPE film cargoes with no additional discount. We believed that international producer might implement further increment in the coming days, however, buying appetite is also falling which indicates that market might be nearing the peak for this cycle.”

In Southeast Asia, international suppliers started offering new cargoes for August shipment mostly with increases from last month. There are very few deals reported as buyers are taking time to evaluate the market trend before taking position.

A major Saudi Arabia producer lifted offers to Vietnam by $20/ton for HDPE film and $10/ton for LLDPE film, bringing latest price list to $1110/ton and $1120-1130/ton respectively, all based on CIF Vietnam term. Players have expected such increment considering the purchasing tempo in the nearby China market. A buyer placed bid at $1090/ton for both LLDPE and HDPE cargoes said, “We are waiting for supplier to feedback. Local market has not caught up with the firming trend in import ground. We hope that demand would improve in quarter 4 in line with the year-end preparation.”

Meanwhile, several other regional and international producers have also announced August shipment prices to Indonesia at stable to firmer level in spite of the fierce competition from local cargoes. An international trader offered Saudi’s PE at $1110/ton for HDPE film and $1125/ton for LLDPE film, CIF Indonesia said, “Local producers have lifted prices this week, creating a reasonable gap with import material, from which we might be able to achieve part of the hike target. Many of our customers are still not active, claiming mediocre end product business and comfortable supply.”

Many regional buyers are stilk searching for import cargoes below the $1100/ton threshold, which become very scarce this week. “We plan to accept Middle Eastern cargoes in the range $1080-1100/ton CIF term. Export business for our end product is a little slow and we would only procure a small quantity of raw material,” a buyer added.

In contrast, PP suppliers are less active in Southeast Asia, causing a general calmer sentiment. International traders attempted to lift homo-PP offers to Vietnam by $10/to week on week, reaching $1090-1100/ton CIF, LC AS term with a source said, “We are collecting bid at $1080/ton with the same term, yet customers are not showing much interest. We feel that buyers are not very receptive toward the hike.”

In fact, Vietnamese buyers, especially local traders are not showing much interest in making replenishment at higher prices claiming comfortable stock on hand. Weak domestic ground also discourages purchasing activities. This week, local homo-PP firmed up approximate VND500,000/ton ($22/ton), yet traders are unable to achieve smooth sales. “We feel that PP market is not having that strong push to have breakthrough rebound. Demand is very sluggish in Southeast Asia and limited supply remain the primary driver keeping prices firm,” a buyer commented.