Asia Daily PP and PE Overview 4 September 2017

In China, futures market extended the firming trend, adding three digits in values to January 2018 delivery contract. PP futures settled at CNY9611/ton ($1256/ton without VAT), a CNY134/ton ($20/ton) gained from last session. LLDPE contract added CNY135/ton ($20/ton) to close at CNY10395/ton ($1359/ton without VAT).

Continuous surging futures market fuelled sellers’ confidence, from which spot offers for both PP and PE today jump CNY200-300/ton ($31-46/ton). This is regarded as domestic producers’ effort to narrow down the price gap between futures and spot trading amid low inventories pressure. Buyers started showing a minor sign of resistance toward the upper end of the overall price range, however, purchasing activities hold steady at the lower end of the range. Converters in the flexible packaging sector reported receiving steady end product orders with a source said, “We think demand shall continue to improve with the Single Day sales is just around the corner.”

In the import market, the general sentiment is rather positive and traders comfortably lifted prices as the biggest supply risk (USA materials) is now out of the picture temporarily. Players are expecting that petrochemical plants in Houston that was shut due to Harvey tropical storm might only be able to come back during November period. “Import PE prices below the $1200/ton threshold are slowly disappearing, except for some Indian cargoes. This trend is expected to sustain until the National Day in October,” a trader opens offers for Saudi material at $1260/ton for HDPE film and $1225/ton for LLDPE film, CFR China, LC AS term, said.

Another trader offer Saudi Arabia homo-PP at $1170/ton for yarn and $1200/ton for injection grade, CFR China added, “Our principal suppliers are taking time to announce new offers as supply is very tight. We are looking out for opportunities to re-export cargoes to America. At the meantime, demand in China is relatively stronger than other markets within the region.”    

In Southeast Asia, there are very limited trading activities observed on the first trading day of the week mostly due to the absence of both sellers and buyers. Only a few companies in Vietnam resumed working today while other are still away for National Day holiday. However, domestic market witness an increase of VND300,000-500,000/ton ($13-22/ton) week on week, following the recent development in the import ground. Traders are commenting about the impact of the recent tropical cyclone that cause a series shutdown at Houston, Texas, USA, foreseeing a significant reduction in cargoes arrival from USA toward end of the year. “In addition to healthy China demand, market might face serious supply shortage in the near term. We prefer to hold back the cargoes,” a market source said.

Similar situation is reported in Indonesia and latest price list from a major domestic producer indicated $30/ton increased from last week for all PE grades. While buyers are taking a step back of evaluate the sustainability of the current trend, traders are taking more aggressive stance, offering both HDPE and LLDPE at IDR150,000-200,000/ton ($11-15/ton) higher than the producer’s price list. A trader added, “Availability for HDPE film is especially tight. We do not think the supply condition could improve anytime so soon, which means that market could be firmer for longer. With both domestic producers have cut fulfilment for contracted cargoes, buyers shall have to source material from the distribution market.”

International suppliers are waiting on the side-line and planning to direct more cargoes to China market this month given healthy netback. Such action could therefore put the supply in Southeast Asia on a hot seat.

There are very few offers available for import homo-PP to the region and suppliers are planning to implement small to moderate hike on the next price opening. Buyers are still not convinced about the recent firming trend in the PP market pointing to low upstream costs, which creates large gap between propylene and homo-PP. “It is purely about tight supply at the moment. We are able to achieve good margins in other markets, and concentrations on Southeast Asia naturally diminish. There is still resistance towards higher price levels, however we think buyers shall accept the hike soon,” a regional trader commented.

After touching the $1200/ton mark in Vietnam in the previous week, a major Saudi Arabia producer has also offered at similar level to Indonesia today, causing a massive concern among buyers. There are no deals concluded at such high price yet, just the seller’s confidence is making converters to take a serious thought about making replenishment.