Asia Daily PP and PE Overview 22 August 2017

In China, futures market skyrocket on the second trading day of the week, adding CNY184/ton ($28/ton) from the previous session to reach CNY9134/ton ($1172/ton without VAT). LLDPE contract jumped CNY230/ton ($35/ton) to close at CNY10040/ton ($1288/ton without VAT).

With LLDPE futures contract surged above the CNY10000/ton threshold for the first time in months, domestic traders feel a strong support for the near term market prospect, in which many decided to withdraw offers from spot market. Demand might come back within this week, players said, as converters would need to make replenishment for the new week.

In the import market, a number of deals for dutiable homo-PP are concluded at above the $1100/ton threshold. A major Saudi Arabia producer reportedly opened new homo-PP offers at $1130/ton CFR China, LC 30 days term today. After initial resistance, the supplier sold the available quantity at only $10/ton discount. A distributor source added, “Demand shall be better in the coming days as converters have been able to transfer the costs to end product prices. And the streamline of environmental inspection process would ease buying interest to a certain extend.”

Meanwhile, the recent territorial tension between China and India has not affected trade between the two countries. An Indian producer reported that they face no difficulties in selling homo-PP cargoes to China in recent days, just that more preferences are placed on exploiting other region with concern that the come back of coal based and MTO plan would minimise business opportunity in China.

A large portion of import PE to China are moving above the $1150/ton mark and market participants are expecting the firming trend might extend until October. “Our concern is on November-December period as many producers, including USA makers, would clear out cargoes before the long holidays, which would pull the whole market down,” an Iranian trader said.

In Southeast Asia, couple of regional and international suppliers have announced September shipment offers at increases from last month. However, producers are not able to transfer the full ethylene hike into PE prices.

A major Malaysian maker opened new offers for PE to Vietnam at $50-60/ton higher than last month, reaching $1280/ton for LDPE film and $1180/ton for HDPE film, all based on CIF Vietnam, LC AS term. Allocation is rather limited, as the producer has not achieved stable production at one of the cracker after annual turnaround, leading to lower operating rate at downstream units. Vietnamese buyers on the other hand, are considering the purchases complaining that domestic market is not catching up. A local trader added, “We are negotiating with the supplier for some discount as we are not prepared to accept such large hike yet.” Many other regular buyers across the region have not received offers from the producer.

Meanwhile, five weeks of continuous price increment in domestic Indonesia market is now facing resistance. On an average, local HDPE and LLDPE film in Indonesia surged nearly $140/ton and $115/ton in five weeks, CommoPlast data showed, in which many converters find negative margins on end product sales. A flexible packaging manufacturer said, “We could not transfer higher raw material costs to end product prices, and thus, even with moderate inventories on hand, we only source material hand to mouth basis.” However, local suppliers in Indonesia are not rushing to meet lower bids, instead, holding back the remaining cargoes, hoping to achieve better margins. The tug of war might therefore persist in the coming week, and with market entering the traditional high demand season, buyers might be left with no choice but to accept higher levels.

The regional PP market remain firm after news that dutiable homo-PP cargoes concluded above the $1100/ton mark in China today. The same Saudi Arabia producer open new offers to China at $1130/ton also give same price level to Indonesia and Vietnam, based on CIF, LC AS term. Indonesian buyers are placing bids at $1100/ton on deals, however the supplier did not accept. A distributor on behalf of the producer commented, “The deals concluded in Vietnam market in the previous week could only be a small technical adjustment. Demand is weak, and yet limited supply would continue to hold the market firm. We plan to offer only a small discount.”

There are also deals for South Korean homo-PP yarn reported at $1150/ton CIF Vietnam, LC AS term, indicating better acceptance among buyers. “Purchasing activities are just slower, especially among traders. Domestic market is really slow and this hurdle demand for import material,” a local trader said.