Asia Daily PP and PE Overview 2 August 2017

In China, futures market is softer though the values only fluctuate in small range. September delivery contract for PP continue to add CNY31/ton ($5/ton) to reach CNY8368/ton ($1063/ton without VAT). LLDPE contract meanwhile, slipped CNY75/ton ($11/ton) to CNY9485/ton ($1205/ton without VAT).

There is little movement in domestic spot market as weak futures trading dampen sentiment. Traders lifted spot prices for both PP and PE by CNY50-100/ton ($7-15/ton) with the support from lacking inventory pressure. In contrast, there are more activities observed in the import market with a good number of deals reported despite firmer prices. A trader purchased Thailand HDPE film at $1180/ton, CFR China, LC AS term said, “We requested for 300 tons and our supplier only can supply a portion. Supply for this origin is tight and we think this firming trend just only started.” Qatari materials are also limited in the market due to some production issues, which lead to a delay of proximate a month, players said.

Most of the cargoes purchased at higher prices this week are set for September arrival, leading buyers to embrace a positive expectation for quarter 4 of the year. “We only managed to conclude a moderate number of deals for Iranian HDPE film at $1140/ton CFR China. We plan to hold our cargoes firm regardless of the buying interest since market still has the potential to advance further,” a trader added.

In contrary, firmer import homo-PP prices do not received such attention from buyers with Saudi cargoes offered at $1080-1095/ton CFR China, LC AS term attracted no deals. “These prices are higher than current local market levels and we have switch a great portion of raw material usage to local cargoes, reducing the need for import materials, except those appointed by customers. Demand for our end product is regular and we hope to see better condition soon,” a converter said.  

In Southeast Asia, trading activities are calmer today though import homo-PP prices to the region continue to climb higher. Most offers for dutiable cargoes to Indonesia have moved to above the $1100/ton threshold, reaching $1100-1150/ton CIF, LC AS term, indicating $20-30/ton increased from earlier this week. However, this also narrows the price gap with non-dutiable materials, which are currently traded at $1120-1170/ton with the same term. The near term price trend remains pretty much on the up trend, just yet buying interest here is weakening as most buyers withdraw to the side-line after a rush replenishment observed in the previous week.

Several PP woven bags manufacturers in Indonesia are also bringing up the concern over the sustainability of the current trend, pointing to the fact that end product prices are falling, which might discourage buyers from accepting higher raw material offers. In addition, players are also highlighting signs of stabilizing domestic market. A trader offers local homo-PP at $1170/ton FD Indonesia, cash term – which is not far from import prices, said, “Sales are slower. Yet, we think market might hold the current position throughout August since most sellers are not facing any pressure. Price list from producer might continue to move up, however it is hard for distribution market to achieve further hike.”

Most PE businesses for August shipment are concluded at this point of time and players are gauging the possible market direction in the coming weeks. With demand in China continue to improve; it is likely that international suppliers would keep prices on the firm to Southeast Asia market. “Up-stream ethylene costs are firm, creating more solid support for a sustainable firming trend. We hold positive expectation for August,” a regional trader said. As a result, a Saudi Arabia producer decided to hold firm on LLDPE film prices to Vietnam at $1140/ton CIF, LC AS term, which buyers are resisting.

Within Malaysia, buying interest is not as strong as other regional market as tightened regulations on used of plastic bags hurt demand. “Most supper markets in Kuala Lumpur and Selangor state might need to use biodegradable plastic bags starting 1 September 2017; yet there is still no clear guideline on this matter, hence our customers are delaying to place new orders. As a result, we only maintain inventory at low level to avoid risks,” a HDPE bag maker said.