Asia Daily PP and PE Overview 26 September 2017

In China, futures market continues to firm up posting a positive outlook just before the long National Day holidays. January delivery contract for PP jumped CNY151/ton ($23/ton) while LLDPE also added CNY110/ton ($17/ton). Both contracts closed at CNY8843/ton ($1142/ton without VAT) and CNY9670/ton ($1248/ton without VAT).

Trading activities in domestic spot market remains relatively healthy as buyers continue making pre-holiday replenishment. It is reported that total PP and PE inventories at domestic producers’ warehouses drop about 50,000 tons today to approximate 710,000 tons, which is well below the psychological benchmark. Players are speculating that inventories pressure after the holiday might not be as high as it was initially expected, and hence the focus started shifting to the demand side. “We do expect post-holiday demand to remain healthy as it is the traditional high demand season for agricultural film,” a trader commented.

There are little movements in the import market and it seems that reducing prices buy in market’s attention. In fact, a good number of deals have been reported for Qatari PE cargoes after the adjustment in the previous session. “We are asking for some LDPE film cargoes and the producer is no longer having available quantity. Market has accepted the prices, which is a good sign,” a market source said.

Players are also brought up the concern over the prospect of ethylene market as prices seems reaching the peak. Ethylene supply in the region is slowly loosening up as PE plants reduce operation, and therefore players are following closely if there would be any correction.

In Southeast Asia, signs of a softening trend burst out in local Indonesia market, where a major domestic trader decided to cut homo-PP offers by $30-40/ton week on week on the back of persistent sluggish demand condition. Buyers are surprised with the development and started reconsidering the purchases of import material, while many decided to pursue the replenish from the local trader given its current competitiveness. A converter commented, “This is the side effect of persistent weak demand in Indonesia. There are also volume discount available and therefore we think import offers for non-dutiable cargoes above the $1250/ton CIF term might face serious resistance.”

As reported earlier, demand for homo-PP yarn in Indonesia has been really sluggish as converters in this sector are unable to obtain sufficient end product orders to cover the costs. The trader’s price decision is believed to have been derived from the fact that on-hand inventory for this grade is higher than usual. Players are watching closely the effect of such development on the import ground.

Import PP and PE at the higher end of the overall price range are attracting very limited buying interest across the region and more suppliers are stepping back on the hike target today. In fact, a Thailand producer decided to cut import homo-PP prices to Vietnam by $15/ton from last week, to $1235/ton while HDPE yarn drops $25/ton to $1275/ton, all based on CIF Vietnam, LC AS term. Supply is still limited given the unstable production condition, however weaker demand is one of the major drivers for the price decision. A source close to the producer informed, “Buyers are placing bids at well below the offered levels. South Korean HDPE yarn is available at very competitive prices and we need to seriously consider the market situation at the moment.”

New weekly PE offers from a major Saudi Arabia producer to Indonesia also indicated a $10-20/ton reduction for both LLDPE and LDPE film, bringing latest price list to $1200/ton and $1300/ton respectively, CIF Indonesia, LC AS term. “We are discussing with our supplier to obtain additional discounts to close deals. Other suppliers are still very firm, however we think market has reached the peak and likely to face minor correction.”