Asia Daily PP and PE Overview 29 September 2017

In China, futures market holds firm position on the final trading day of the week before the long National Day holiday. PP contract inched CNY85/ton ($13/ton) up to close at CNY8903/ton ($1146/ton without VAT). LLDPE contract increased CNY25/ton ($4/ton) to reach CNY9665/ton ($1244/ton without VAT).

Chinese buyers have completed all pre-holiday replenishment activities, leaving market muted just before the long holiday kick-starts. Total PP and PE inventories at local producers’ warehouses drop another 40,000 tons today, to approximate 580,000 tons, eradicating all concern over the bloated supply condition in the post holiday period. Traders are becoming very optimistic about the near term market outlook, pointing to low inventories levels at converters’ side. “It is also the traditional high demand season from the agricultural film sector as well as the peak preparation for the Single Day sales festival. We are confident about the market trend in October,” a trader said.

Such strong sense of optimism, however, appears to be a risk to conservative industry participants, whose focus is on the expected surge in import arrival in September. “Many cargoes purchased this week in local ground are also scheduled to be delivered after the holiday, hence buyers might not return immediately after the break. We concern that post-holiday replenishment might delay slightly,” a source said.

As a note to members, CommoPlast will not publish any Daily Overview on China market from 2 – 6 October 2017, following the National Day holiday in this market.       

The general sentiment in Southeast Asia is rather quiet on the final trading day of the week as buyers are generally withdraw to the side-line waiting for further development. In a more precise perspective, regional buyers are waiting for a price correction to take place considering flattened demand in China and stiff resistance across SEA region.

Regional PP market has shown signs of minor drop in prices, yet suppliers are just not in the position to concede to any large discount citing the lack of inventories pressure. “We tried to place bids for South Korean homo-PP yarn at $1130/ton CIF Vietnam, LC AS term and got rejected right away. We are still having lower cost cargoes on hand and might wait further before making fresh replenishment,” a Vietnamese trader commented.

Middle Eastern PP suppliers are particularly firm on their cargoes, especially with PetroRabigh taking the 350,000 tons/year homo-PP line off-stream for 30 days this October. “This is hammering the already very tight market, and therefore we do not expect any major shift in market direction. We are monitoring the state of demand during the post-holiday term in China very closely. We are not having large allocation,” a regional trader affirmed.

There have not been any further developments in the regional PE market. While buyers are very cautious about accepting the current price levels, suppliers remained unchanged in their firm stance. Two international trader offered Saudi Arabia HDPE film and LLDPE film at $1230/ton and $1220/ton to Vietnam, CIF, LC AS term shared the same situation, “We have not been able to close any deals at this price while our principal supplier is not rushing to make any decision. Buyers are very reluctant and therefore we think there might be a small discount for deal in the coming week.”

There are a good number of lower costs PE cargoes purchased previously arriving Vietnam this week, causing a slight drop in domestic prices. As a result, local traders are not showing much interest in making fresh purchases, instead putting effort to deplete on hand cargoes. A prevailing risk emerge is that local PE supply in Vietnam might dry up in November due to the lack of replenishment this month.