Asia Daily PP and PE Overview 1 September 2017

In China, futures market surged to multi month high levels on the first trading day of the month. January delivery contract for PP jumped CNY247/ton ($37/ton) to close at CNY9565/ton ($1239/ton without VAT). LLDPE contract added CNY220/ton ($33/ton) to reach CNY10360/ton ($1342/ton without VAT).

Trading activities in domestic spot market is healthy as converters return to make replenishment before additional hike is introduced. Traders take a more aggressive stance to implement CNY100-200/ton ($14-30/ton) increased on both spot PP and PE offers. A converter said, “Some of our regular suppliers even withdraw offers claiming running on availability. Futures market is firm and prices might continue to increase next week.”

In import ground, a number of deals for import PE are reported above the $1200/ton threshold, including origin such as Iran, Middle East and India. Another trader sold Saudi Arabia and Qatar LLDPE film at $1220-1230/ton CFR China, LC AS term reported similar situation while adding, “The trend might sustain throughout October despite the National day holiday. We are holding back some of the quantity for market might witness stronger hike in the coming week.”

Import PP market witness similar situation with good number of deals are reported at $1120-1130/ton CFR China term. By the time this report is published, there is no other homo-PP offers stand below the $1150/ton threshold. “Most suppliers claimed sold out for homo-PP, the remaining offers from traders are ranging at $1160-1170/ton for dutiable origins. Market might be firmer in the coming week,” a market source said.

Meanwhile, Chinese traders are eyeing arbitrage opportunities in the USA after a super tropical cyclone forced a number of producers along the Houston coastal area to shutdown. These petrochemical complexes might take weeks or months to resume operation. Data showed that PP is among the worst affected product by the event, alongside ethylene and propylene. The number of PP plant shutdown in Houston accounted for 65% of the country’s total PP output, indicating a huge drop in supply in the near term. “We started receiving inquiries from USA suppliers to re-export PP cargoes from China, unfortunately, we are not having supply at the moment,” a trader in Shanghai said.

There are very limited trading activities in Southeast Asia today with Indonesian, Malaysian and Singaporean players are on holidays. However, in Vietnam, market sentiment is improving following the latest development in China and the USA. Buyers here are becoming more receptive toward higher price levels and some have actually entered deals.

A buyer purchased Indian homo-PP at $1130/ton and Thailand HDPE film at $1160/ton and LDPE film at $1250/ton, CIF Vietnam, LC AS term said, “Most cargoes are being diverted to China recently, which means Southeast Asia might suffer from a serious tight supply condition in the coming months. We are planning to stock up additional 200 tons for each grades by next week.”

At the meantime, international sellers are either holding firm on their cargoes or expressing the intention to implement further hike on import offers to Vietnam in the coming week. “Our regular Saudi Arabia supplier is very firm on LLDPE film cargoes at $1190/ton CIF Vietnam term. We might need to purchase a small quantity at this price to maintain safe inventory level,” a buyer reported.

“Korean producer informed that they intent to offer homo-PP at $1220/ton CIF Vietnam next week due to healthy demand from China in recently weeks. The combined effect from China and USA seems stronger than expected,” another Vietnamese source added. Local traders started to withhold offers hoping that domestic prices could continue to firm up following the National Day holiday on 2 September.