Asia Daily PP and PE Overview 14 September 2017

In China, bear continues to run the futures market, causing another session of drastic loses. January delivery contract for PP plunged CNY303/ton ($46/ton) to close at $8906/ton ($1162/ton without VAT). LLDPE contract slipped CNY265/ton ($40/ton) to reach CNY9765/ton ($1274/ton without VAT).

In domestic market, buyers are searching for cargoes at the lower end of the overall price range, especially for PP. Traders reportedly closed good deals for this grade after conceded to CNY150/ton (23/ton) discount from the previous day. Demand for PE, on the other hand, is not as strong as PE though prices have also drop about CNY100/ton ($15/ton). A trader informed, “We visited a number of PP buyers this week and most are having 10 days worth of inventories. Buyers would still need to make replenishment, and thus we think this might prevent market from any significant slide in the near term.”

In the import market, prices at the upper end of the overall range are attracting very limited buying interest. After a major Thailand producer stepped back on the LLDPE film offers in the previous trading day, more producers started taking similar action. It is reported that a major Saudi Arabia producer, whose PP and PE offers witnessed $90/ton increased from late August, has now cut down on the hike target by $30-40/ton, to close deals at $1160-1170/ton for homo-PP and $1290/ton for LDPE film, all based on CFR China, LC 90 days term. A trader sold the parcel said, “We have regular allocation this month and it seems that buyers are paying more attention to local ground this week, following the down trend in futures trading. As a result, it is more difficult to attract sales, in spite of the strengthened Chinese Yuan.”

Import offers to China are stabilising and might see small adjustment in the coming days, however the near term outlook remains positive, traders said. Low inventories at converters’ side might encourage buyers to make another round of replenishment before going off for the National Day Holiday. And at the moment, buyers are waiting for the best price possible.

In Southeast Asia, the firm sentiment remains in place though there is a strong sense of caution blankets the regional market. Buyers are not comfortable with the rapid hike in prices in recent weeks, and many decided to withdraw to the side-line, monitoring further development.

Import homo-PP to the region appears to be stabilizing and dutiable cargoes priced above the $1200/ton attracted no deals. A Saudi Arabia producer announced import homo-PP offers to Indonesia earlier this week at $1230/ton CIF, LC AS term, which faced stiff resistance from the market. A distributor informed, “Buyers are shocked with the prices while comparing with non-dutiable cargoes. We only manage to sell a small quantity after conceded to discounts. At the meantime, we are not having large allocation on hand.” Couple of other international suppliers prefers to hold firm on the prices hoping to see better sentiment in the coming week.

In contrast, sentiment in Indonesia domestic spot market is cooling down and traders are putting more effort to deplete the cargoes. Sources reported facing slower sales condition this week as buyers hold tight to the belief that a price correction is necessary. In fact, converters in the woven bag sector are encountering difficulties in transferring higher raw material costs to end product prices, especially when a fertilizer tender has been cancelled. A buyer commented, “We have been waiting on the side-line throughout this week with comfortable inventories on hand. Prices increase too quickly while demand is not catching up. We think market might witness small downward adjustment by mid-October.”

In domestic Vietnam market, prices are stabilising and it is the tug of war between limited availability and weak end product businesses. However, traders seems to be giving in, becoming more willing to release the cargoes to the market following the dropping in buying interest in the nearby China market. A source commented, “The affected plants in Houston, USA are resuming production after the Hurricane Harvey, however, supply might need more time to arrive to the market. We believed that the current firming trend in Asia would spread into October. The tight supply condition is keeping market from any possible dip.”

Very few Middle Eastern suppliers offer LLDPE film cargoes to Southeast Asia this week, possibly due to better margins in China. While there is still no sign of any serious shortage in the market, if this condition persist, Southeast Asian buyers might be facing tightness of ready stock entering the fourth quarter of the year.