Asia Daily PP and PE Overview 11 August 2017

In China, futures market turns red on the final trading day of the week as it marks the beginning of the new contract – 1801. LLDPE for January 2018 delivery plunged CNY245/ton ($37/ton) from the previous day to reach CNY9555/ton ($1224/ton without VAT). Same contract for PP only slipped CNY91/ton ($14/ton) to close at CNY8714/ton ($1117/ton without VAT).

Despite falling futures prices, trading activities in local market remain within expectation. Converters in the packaging sector are placing orders due to improved end product demand. Players expected this is the start of the traditional high demand season, which might last throughout the coming months. However, concern focus heavily on the pre- and post- National Day replenishment activities, in which a lot of optimism has shown.

A trader said, “Environmental inspection in Northern area has completed and converters are slowly ramp up production rate as they obtained the certificate. We are looking forward a better market condition in the near term.”

PP supply in the market appears to be tight, which support prices to remain on the firming trend. This is expected to persist throughout August, players said.  

In Southeast Asia, market is rather quiet on the final trading day of the week though prices are firm for both PP and PE. Suppliers are not loosing stance on their remaining cargoes, especially when better margins are achieved in China already. Buyers are on the other hand; continue to show resistance to higher prices and prefer to wait on the sideline.

A trader offer final price for Kuwait HDPE film at $1135/ton CIF Vietnam, LC AS term, a $15/ton lower from initial price list said, “Other traders are willing to offer at slightly lower level, making market become more competitive. Our customers are not accepting the hike, however market is really firm and we might hold the cargoes until next week.”

Meanwhile, end product demand from the flexible packaging sector in Indonesia seems improving, which is out of expectation, players said. A major brand owner in the country reportedly increased the volume of end product purchased over the past week. A source said, “Raw material prices has gone up considerable in recent week and we decided to stock up additional stock as end product prices might move higher too.”

In the PP market, after deals for Saudi Arabia and Indian homo-PP concluded at above the $1100/ton threshold in Vietnam and Indonesia, the sentiment is muted again. A majority of regional buyers are still very cautious and find it hard to accept the current high prices and again, sellers are not giving up any ground. An international trader offers Middle Eastern homo-PP yarn at $1140/ton CIF, LC AS term. A buyer commented, “This is too high to accept and we might need a little longer time to observe the market before making decision.”

PP yarn demand in Indonesia appear to be a little soft, in contrast players reported seeing better interest for injection grade. “Our customers have accepted higher prices for homo-PP injection and this would support the market. Yarn grade is a little soft, but we are positive about the near term outlook,” a local trader added.