Asia Daily PP and PE Overview 25 September 2017

In China, futures market regains some strength after five straight falling sessions last week. January delivery contract for PP gained CNY150/ton ($23/ton) to reach CNY8783/ton ($1137/ton without VAT). LLDPE contract increased CNY50/ton ($8/ton) to close at CNY9590/ton ($1242/ton without VAT).

Apparently, pre-holiday replenishment activities are still going on, it just concentrates more on local ground, as buyers are waiting for import sector to gain more stability. “Besides, converters have much of the shipment cargoes covered in the previous weeks, and at the moment, many are searching for ready spot parcels in local ground to meet the immediate need,” a market source informed.

Sales for LLDPE film in local market also recorded healthy result over the past days thanks to the end of the environmental inspection in Shandong, Linyi, Zibo area that allow agricultural film makers to resume normal operating rate. “We need to stock up some immediate cargoes while waiting for deep-seas materials to arrive. Demand for our end product it healthy and might continue to improve in the near term as the weather is turning cold,” a converter commented.

In the import makret, overseas makers continue to cut PE offers to China as buyers receding to local ground. A major Thailand producer cuts offers for HDPE and LDPE by $30-40/ton, reaching $1260/ton for HDPE film, $1265/ton for HDPE yarn and $1290/ton for LDPE film, all based on CFR China, LC AS term. LLDPE film witnesses another nosedive of $80/ton at $1270/ton with the same term. “The prompt shipment schedule does not seems to play an upper hand today as buyers are putting attention on local market as well as the presence of more competitive Middle Eastern cargoes. We fear that more discounts must emerge if the maker hope to deplete inventories before buyers go off for the holiday,” a trader commented. Depreciating Chinese Yuan is also blamed for slower demand for import materials.

Trading activities in China might continue to weaken toward the end of the week, especially in the import ground, in line with the impending National Day holiday. This might put additional pressure on international suppliers, who have been pushing PE offers to China to multi-months high levels earlier this month. However, there is still strong hope that tight supply and strong ethylene market might help to limit the extent of any price correction.

In Southeast Asia, regional and overseas suppliers are becoming more active in opening fresh offers for October shipment, mostly with increases. Some cargoes are seeing three digits hike month on month, putting more weight on an already wary market.

Two Southeast Asian producers lifted PP and PE offers to the region with increment ranging $50-100/ton. Initial respond from market is not very positive toward such rapid increment, claiming inability to transfer the costs to end product prices. “We are fully aware of the upstream situations, however, prices are just ways above the acceptance levels. We plan to negotiate to meet only immediate need,” an Indonesian buyer said.

Market is also reporting that Singapore’s TPC is planning a major maintenance shutdown at the LDPE unit by mid 2018, in which the producer might be reducing allocation to regular buyers, especially LDPE lamination grade. Several converters are seeking for alternative source of material to maintain safe inventories levels.

Meanwhile, Indonesian traders decided to step back on local PE prices by approximate IDR130,000/ton ($10/ton) from last week amid slower demand condition. A buyer received LLDPE film at IDR17,950,000/ton ($1347/ton) without VAT, FD Indonesia, said, “It is clear that market has reached the peak. We are having comfortable inventories till November and we prefer to wait for additional discount to emerge before making fresh purchases.”

The regional market is rather stable. Most suppliers are not willing to enter price negotiation claiming limited availability. An international trader open offers for Middle Eastern homo-PP yarn $1175-1180/ton CIF Indonesia, LC AS term. The source added, “We are still able to close deals at these levels, hence in no rush to make adjustment. Supply is tight and we think the recent soft movement in China is not a major trend. Southeast Asian market might be able to hold up in the near term.”

Market is quiet in Vietnam, though buyers started seeing the availability of Chinese coal based homo-PP again after a long absence. A converter commented, “Chinese suppliers are still not active in Vietnam yet, which means that domestic China is still acceptable. Other suppliers are standing very firm on the prices, yet we prefer to be cautious as prices are too high now.”