Asia Daily PP and PE Overview 18 August 2017

In China, futures market concluded the final trading day of the week on firm note. January delivery contract for PP added another CNY77/ton ($12/ton) to reach CNY8837/ton ($1129/ton without VAT). Meanwhile, LLDPE contract increased CNY80/ton ($12/ton), reaching CNY9735/ton ($1244/ton without VAT).

Purchasing activities in domestic spot market hold steady with arbitrage traders returned to take cargoes, hoping that futures trading would continue to firm up in the coming days. Meanwhile, converters are very steady in replenishing new stock in line with the up coming high demand season. A trader claimed to have sold satisfactory quantity of PE to local buyers said, “Converters are gradually placing larger orders. Domestic sellers managed to maintain low inventory levels, which might keep spot market firm in the near term.” Local offers for both PP and PE therefore firmed up by another CNY50-100/ton ($7-14/ton) compared to the previous session.

In the import market, couple of deals for Qatari LDPE film are reported at $1230/ton CFR China, LC AS term, however the quantity is small, which players are not considering this to be the major trend. This is because there are still Iranian LDPE film cargoes offered at below $1200/ton threshold, at $1170-1180/ton CFR China, TT in advance term and attracted no deals. At the meantime, demand for HDPE pipe appears to be healthy too with Middle Eastern cargoes concluded at above $1400/ton mark, CFR China, LC AS term. This is an effect from strong PVC demand in recent month.

Demand for homo-PP injection and PP Block copolymer is reported to be good as converters in the automotive and household sector see satisfactory number of end product orders.     

In Southeast Asia, it becomes clear that the firming trend in import PP market is loosing momentum, in which several international producers started to loosen stance on their cargoes.

In fact, a major Saudi Arabia producer, who rollover import homo-PP prices to Vietnam at $1120/ton CIF term earlier this week, decided to conclude deals at $1100/ton with the same term – a $10/ton below done deal level last week. Players attributed such movement to the growing pressure from the presence of competitive non-dutiable Asian cargoes. A buyers purchased ten containers of Thailand homo-PP at $1120/ton CIF Vietnam, LC AS term said, “This is duty free cargo and apparently more attractive than Saudi Arabia material. Market is loosing steam and we prefer to maintain passive stance over large buy.”

Another buyer received offers for Korean homo-PP at $1090/ton, CIF Vietnam added, “The quantity is small, however it is affecting the general market sentiment. We are negotiating with the supplier to obtain a small discount to close some deals.” Despite the development, players are not expecting any drastic downward movement in the near term as tight availability provide a grip for the market.

In regional PE market remains firm and players are waiting for regional and international producer to announce new prices. Meanwhile, as expected, Indonesia’s PT. Lotte Chemical Titan reportedly reduced operation rate because high ethylene costs make it uneconomical to produce PE. Indonesian buyer said, “The maker has suspended all spot offering while only fulfil 50 per cent of contract orders. Domestic PE prices might continue to firm up in the coming week, in line with tightening supply.”

Vietnamese traders continue to re-export Thailand and Saudi Arabia LLDPE film to China, though prices hold steady at $1170-1180/ton CFR China term. A trader commented, “We made some profit selling at this level. Local market has also firm up a little and we are negotiating with seller to make some replenishment. At the meantime, we are very concern over the ethylene costs as it seems market has reached the peak.”