Asia Daily PP and PE Overview 19 September 2017

In China, futures market continues to shred more values from the 1801 contract. PP futures dropped additional CNY108/ton ($16/ton) to close at CNY8757/ton ($1137/ton without VAT). LLDPE contract losses another CNY85/ton ($13/ton) to reach CNY9670/ton ($1256/ton without VAT).  

Trading activities in domestic spot market slow down visibly despite the CNY100/ton ($15/ton) discount available on both spot PP and PE cargoes. Private data showed that total PP and PE inventories at domestic producers’ warehouses rose to approximate 817,000 tons as of today, stirring the fear that the figure might jump to above the 1 million tons during the post National day holiday term.

“As a result, converters are not rushing to make additional replenishment, instead waiting for more discounts to emerge. A good sign is that real demand from manufacturer is there and therefore we do not expect any significant reduction in prices,” a trader commented.

In the import ground, a major trader in Shanghai make an unexpected move to cut offers for Indian homo-PP by $20-30/ton compared to earlier this month, to $1130/ton CFR China, LC AS term, November shipment. A source close to the trader reported, “Even with the reduction, our regular customers are not aggressively fetching the cargoes. We continue to monitor the respond before making further decision.” Explaining further, the trader added that continuous weakening local market due falling futures trading and rising inventories levels might threaten the market prospect in the near term. Pre-holiday replenishment activities might concentrate on local ground instead of import market, the source said. 

In Southeast Asia, couple of international and regional producers announced fresh PE offers for October shipment with up to $100/ton increased from last month, citing limited supply and strong upstream costs. However, buyers are not very responsive towards the latest price level and many are not planning to make replenishment this time.

A Saudi Arabia maker lifted HDPE and LLDPE film offers to $1230-1250/ton to Vietnam and Indonesia, CIF, LC AS term. A Vietnamese buyer commented, “We are not planning to accept such high prices since domestic offers are softening. We think the supplier might need to concede to at least $40/ton discount in order to attract sales.”

Demand for PE in Indonesia has been weakening, as converters are unable to pass on the increases in raw material costs. Many are seeking alternatives to protect profit margins and recycle seems to be the best next choice. “Many of our overseas customers are cutting down on end product orders at the current raw material prices and therefore we are not planning to make additional replenishment in the near term. Import offers above the $1200/ton threshold to Indonesia might face resistance.”

The regional PP market is rather quiet. The pevious lower import homo-PP prices at $1165-1170/ton have not repeated in this week as these positioned cargoes seems to have been sold out. International suppliers continue to maintain offers firm amid persistent weak buying interest across Southeast Asia.

It is reported that a major Saudi Arabia producer has announced fresh homo-PP offers to Indonesia at $1190/ton for yarn and $1230/ton for injection grade, all based on CIF, LC AS term. However, deals for homo-PP injection are reported at larger than usual discount, at $1170-1180/ton CIF Indonesia, LC AS. A distributor offered on behalf of the producer added, “Demand for yarn is not very strong and we might need to concede to $10-20/ton reduction to close deals. We are having regular allocation this week.”

Meanwhile, customers in Vietnam are taking very caustious stance following a drop in local market. Besides, the absrupt price cut emerged in China market today has also caused a certain degree of slow down in this market. “We think there might be a small adjustment in the coming days, hence prefer to wait and see,” a household products maker shared.