Asia Daily PP and PE Overview 31 July 2017

In China, futures market remains weak on the first trading day of the week yet the range of reduction is much smaller. September delivery contract for PP closed at CNY32/ton ($5/ton) lower at CNY8225/ton ($1045/ton without VAT). LLDPE contract dropped CNY20/ton ($3/ton) to CNY9420/ton ($1196/ton without VAT).

The most discussed topic today in local ground center on the shutdown of approximate 2000 factories in Juxian, Shandong province in light of tightened environmental regulations. The order issued by the Chinese Environmental Bureau comes as many plants that were shut due to serious violations of environmental standards yet found to be still operating. Though such environmental inspections have been on going since earlier this year, what caught attention this time is a vast number of factories using HDPE cargoes involved in this round. These plants might need to remain offline for one to two months to carry out waste management inspections and obtain illegibility certification before resuming production, which might affect demand on a cumulative level.

There is little movement in the import market and players are hoping to see a more stabilized market condition in the near term. Import Indian homo-PP offered at $1030/ton, CFR China, LC 30 days term with a trader informed, “We are unable to attract as strong sales as expected. There are only specific grade of Saudi homo-PP could reach the $1070/ton mark. Tight supply is balanced with lackluster demand, from which prices are unlikely to firm up too significantly in the near term.”

Meanwhile, sources are placing a more bullish bet on market outlook in quarter 4 of the year, claiming that year-end festive season could stimulate demand.       

In Southeast Asia, there are very limited number of new offers for import homo-PP observed on the first trading day of the week, however several have expressed the intention to implement hike on the next offers. Indonesia market is especially attractive to overseas suppliers at the moment since improved demand condition help boost domestic offer, creating comfortable gap between local and import cargoes. A trader sold Vietnamese homo-PP at $1140/ton CIF Indonesia, LC AS term said, “We are planning to implement $30/ton hike this week thanks to stronger local ground. At the moment, most other suppliers are monitoring further development before announcing new prices.”

An Indonesian buyer received offers for Philippines homo-PP at $1130/ton CIF, LC AS term opined, “Domestic prices have surged approximate $50/ton in just two weeks time and we see market is returning to normal after a round of panic replenishment. Players are now might pay more attention to the state of demand in China to gauge the likely market direction in the near term.”

Vietnamese buyers are sharing similar opinion pointing to the fact that the absence of Chinese material has allowed other international sellers to lift offers in recent week. “This trend is set to sustain if Chinese sellers do not face intense inventories pressure,” a buyer added.

The regional PE market is also firming up moderately though buying interest is not very strong ever since prices below the $1100/ton threshold disappeared. And with the latest development in China regarding the shutdown of approximate 2000 factories in Shandong areas, buyers are becoming more cautious in accepting the new hike. A Vietnamese buyer received new offers from a Saudi Arabia producer with $30/ton increased, reaching $1140/ton for HDPE film and $1150/ton for LLDPE film, CIF, LC AS term. The source added, “It is difficult to accept these levels at the moment and we have made some purchases in the previous week at much more competitive prices.” Local PE market in Vietnam does not seem to gain sufficient support from international ground due to slack demand condition.