Asia Daily PP and PE Overview 21 September 2017

In China, futures market deepened into the red zone, falling another CNY190-193/ton ($29/ton) for both PP and LLDPE contract. PP futures settled at CNY8610/ton ($1117/ton without VAT) and LLDPE at CNY9520/ton ($1235/ton without VAT).

Converters are returning to make replenishment, though very selective when it comes to prices. In order to smoothen sales process, traders continue to reduce offers by additional CNY100/ton ($14/ton) for both PP and PE cargoes. “We managed to conclude better number of deals today. Local market might continue to follow the softening trend unless futures market posts significant rebound. This would keep converters in the market longer than usual before the long holiday,” a trader commented.

Many converters in China are not taking the full eight days off to celebrate the National Day holiday due to high number of end product orders. When translate to demand, this would means that buyers might need to stock up more cargoes in the coming day to avoid production disruption. Real demand from converters remains in the picture.

However, softer prices on both futures and local spot market is putting tremendous pressure on import sector, forcing more traders to bring prices back to the realistic levels. In an interesting development in the import homo-PP market in China, couple of traders race to cut prices for Indian and Saudi Arabia origin cargoes in an effort to test market acceptance and deplete inventories before the holiday kick off. The offers stand at $1100-1110/ton for both origins, down by another $20-30/ton compared to the latest adjustment earlier this week. A good number of deals for these cargoes are reported as buyers considered the price levels to be competitive. A trader purchased the cargoes informed, “The quantity available at this price level is not high as they come from arbitrage traders, however it would affect the general sentiment, pulling other suppliers to the same direction if these prices continue to be available in the coming week.”

In Southeast Asia, there has not been any drastic shift in market direction despite the apparent slow down in China. Most overseas suppliers maintain very firm stance on the available cargoes regardless of the stiff resistance facing across the region.

Couple of Middle Eastern LLDPE film cargoes are concluded in Vietnam at $1210-1220/ton CIF, LC 0-60 days term. These prices are about $30/ton below initial offers, however they are still above buyers’ idea levels. Players were expecting more rapid decline in prices, yet force to accept the current levels due to tight availability from the overseas suppliers. “However, the number of deals are very limited and at discounted levels compared to initial offers. Buyers are very conservative about making large purchases,” a marker source informed.

Weakening demand in the nearby China market seems to have some effect on the general sentiment in Vietnam, just not as strong as players expected. Many are postponing purchases, hoping that a quieter China market would put more weight on suppliers, which could lead to additional discounts.

Meanwhile, a Malaysian maker lifted LDPE and HDPE film prices to Vietnam by $80-100/ton from last month, reaching $1360/ton and $1280/ton respectively, CIF Vietnam, LC AS term. Buyers are very reluctant toward the latest price list and most other import LDPE film cargoes are prices just around the $1300/ton threshold at the moment. “The producer might be lacking of inventories pressure due to plant issues, however, we are not able to commit any reasonable quantity at such level. We are negotiating for some discounts,” a buyer said.

The regional PP market is firm. Deals for Saudi Arabia homo-PP cargoes are concluded at $1180/ton to Vietnam, based on CIF, LC AS term. Prices in the range $1165-1170/ton with the same term have not repeated. “Most deals are concluded by converters, who are in need to maintain safe inventories level. Traders are far more reluctant considering the current state of demand in local ground,” a market source commented.

Regional suppliers are hoping to see more of stabilising market in Southeast Asia with the support from the general supply tightness, defying the aggressive stance taken by Chinese traders in cutting prices to speed up sales.