Asia Daily PP and PE Overview 7 September 2017

In China, futures market plunged hard today, shredding three digits in value compared to the previous session. PP contract for January delivery loses CNY203/ton ($31/ton) to close at CNY9310/ton ($1217/ton without VAT). LLDPE contract dropped CNY155/ton ($24/ton) to reach CNY10160/ton ($1328/ton without VAT).

Despite two consecutive sessions of weakening, sentiment in spot market sees little changes. Import offers remain largely stable to firm though price ceiling for PE seems to have developed as offers at $1300/ton mark and above are facing strong resistance. A trader opens offer for Indian HDPE yarn at $1260/ton CFR China, LC AS term, $40/ton below initial sell idea. Several deals for the cargoes are reported at $1230/ton with the source informed, “Too high prices shy buyers away. Suppliers are not facing sales pressure, hence many prefer to hold firm stance. However, buyer acceptance is not catching up.”

Iranian PE cargoes purchased previously continue facing delay in shipment as most plants in this country are not operating smoothly due to lack of ethylene supply. Production is expected to normalise by October, the concern is on the time when these cargoes arrive. An Iranian trader said, “We have about 70,000 tons of purchased order being delay for two months. Temporary, market might see very limited import arrival, which might keep market firm.”

A good number of deals for Indian homo-PP are concluded in northern China area at $1160/ton CFR China, LC AS term. “Supply for PP in northern market is tighter than other areas, though we think the price cycle is nearing the peak this round,” a trader said.

In Southeast Asia, the general sentiment is firm and purchasing activities started to pick up, which is slight delay compared to China. At the meantime, supply remains relatively tight, from which a number of regional producers are planning to implement further hike in the coming week.

Import homo-PP from non-dutiable origins to Vietnam hit above the $1200/ton mark for the first time in many months and a deal for Thailand homo-PP yarn is reported at $1210/ton CIF Vietnam, LC AS term. The producer immediately up-adjusted prices by $20/ton after the deal. A source close to the producer stated that supply and very limited while adding, “Converters are running low on inventories and hope on the arrival of low cost USA cargoes crushed in the Harvey cyclone. We are confident that market would accept higher price level soon.”

Meanwhile, another South Korean producer delays announcing new offers for homo-PP to Vietnam, yet expresses sell idea at $1220/ton CIF, LC AS term. The source added, “We are only having PP block copolymer cargoes at the moment priced $1190/ton CIF Vietnam, LC AS term. Market might resist our offers and we think tightened availability would show the effect.”

In Indonesia, Middle Eastern cargoes at the $1150/ton mark is no longer available at the time this report is published and several offers for this origin emerged at $1170/ton CIF Indonesia, LC AS term. A trader said, “Indonesian buyers are still very conservative about procuring additional quantity, especially the yarn grade, complaining slow end product business.” There are market talks that the latest government tender for fertiliser bag has been cancelled, which might disappoint many woven bag makers.

In contrast, replenishment activities for PE cargoes in Indonesia are rather healthy, in which a major local producer decided to implement additional $20/ton increase on all PE grades to domestic buyers, citing tight supply. Availability in distribution market is even very tighter at the moment and buyers are becoming more willing to procure additional stock following rumour that prices might face larger increases in the coming week. “We have sufficient material for three months now and we are waiting on the side-line to monitor further development,” a converter said.

Similarly, local LLDPE film prices in Vietnam has been moving higher on a daily basis since earlier this week, totalling an increase of VND1,000,000/ton ($44/ton). Buyers are slowly accepting the hike, concerning the risk that supply might be short in the coming week. A flexible packaging converter purchased the locally held Saudi Arabia LLDPE film at VND30,200,000/ton after obtaining VND200,000/ton ($9/ton) discount. The source said, “We only have 15 days worth of stock and therefore we have to make replenishment though prices are too high. We have asked several other suppliers and very few have material on hand.”