Asia Daily PP and PE Overview 15 September 2017

In China, futures market concluded final trading day of the week on soft noted. January delivery contract for PP dip another CNY147/ton ($23/ton) to close at CNY8885/ton ($1163/ton without VAT) while LLDPE contract dropped CNY135/ton ($21/ton) to reach CNY9750/ton ($1276/ton without VAT).

The preliminary data on import PP and PE to China for the month of August showed a large increase in quantity compared to the previous month, raising concern over the state of local supply in the near term. Total PE arrival in August reached approximate 1,047,000 tons while PP stood at 374,000 tons. Import arrival for September is expected to be at bigger figures. “And we need to re-evaluate the outlook in the post-holiday term as availability might become better. Converters are not having high inventories, however would pre-holiday replenishment activities be healthy, especially with expected improved local supply condition, ” a market source commented.

Dalian Commodity Exchange market fell seven out of past ten sessions, slashing most of the gains January contract accumulated during late August. Buyers are very selective when it comes to making purchases as weakened futures trading takes an important position in the decision making process. Traders therefore offer another CNY100/ton ($15/ton) discount on both spot PP and PE cargoes to entice sales.

In the import market, Thailand producer cut LLDPE offers by additional $50/ton, marking a total reduction of $80/ton compared to last week, bringing latest LLDPE film prices to $1300/ton CFR China, LC AS term. Other grades remain largely stable. Buyers are still reluctant to accept such high prices citing the risk from continuous falling futures market this week. A source close to the producer informed, “Our offers were too high in the previous week and it is hard to attract sales. We think market might still remain firm in the near term considering the current upstream costs.”

There are very limited new offers for homo-PP observed and it seems prices above the $1200/ton mark are not attractive to buyers. Middle Eastern suppliers might only announce new prices in the coming week, while Vietnamese homo-PP yarn appears at $1205/ton CFR China, LC AS term. A buyer reported the offers and said, “We have stocked up comfortable inventories and currently in no rush to make additional purchases. We do believed that PP market has reached the peak of this cycle.”   

In Southeast Asia, it appears that overseas homo-PP suppliers are loosening stance on the cargoes on the final trading day of the week as the rapid firming trend bumped into stiff resistance. Indian homo-PP cargoes are now available at $1165-1170/ton CIF Vietnam, LC AS term from three major distributors in the country, which is $10/ton blow initial price list. Vietnamese buyers are surprised and a source said, “We placed bid at this level earlier this week and got rejected. Today the supplier down-adjusted their offers and we procure a small quantity.”

Deals for import homo-PP injection from Oman also reported at $1170/ton CIF northern Vietnam LC AS term. The supplier was not willing to accept any bids in earlier sessions has now conceded to $20/ton reduction from price list to close deal. Local traders are still cautious despite running low on inventories. A trader said, “Either import market has to come down another $40/ton or domestic ground has to firm up, else we are not making profit buying at the current market levels. Therefore, we are not in rush to make replenishment.”

Expectation for large drop in prices might temporary not able to materialize, considering the current supply condition. Many buyers therefore prefer to wait on the side-line to have clearer picture regarding the pre-holiday replenishment activities in China before taking position. Any up-tick in replenishment activities would fuel stable to firmer market trend.

The regional PE market in contrast, remains very firm. Thailand, South Korea and Taiwanese maker announced new offers to Vietnam with drastic increases week on week, claiming healthy export results to the USA. In fact, South Korean producer opens fresh HDPE and LLDPE film offers to Vietnam at $1295/ton CIF, LC AS term today and buyers in the country are naturally shied away. Local traders continue to wait and see while digesting the on hand cargoes instead of committing to fresh purchases.

Regional supply for HDPE blow molding might be tight throughout this quarter as Thailand’s SCG is still unable to stabilize run rate at its HDPE units. “We were informed that availability for Thailand HDPE blow molding will be very limited until end of the year. We are very concern and might need to seek alternative source to make a small quantity purchases,” a regional buyer added.