Asia Daily PP PE Report 18 Mar 2016

In China, futures prices on Dalian Commodity Exchange finished the last trading day of a highly volatile week on a higher settlement level, marking the third consecutive days of rally. PP contract for May delivery added CNY158/t ($24/t) to close at CNY7381/t ($974/t without VAT) and LLDPE contract advanced CNY215/t ($33/t) to settle at CNY9460/t ($1248/t without VAT).

Domestic spot offers for both PP and PE gained CNY100-200/t ($15-31/t) compared to yesterday thanks to a solid support from futures trading. Not only prices went up, even market sentiment was given a boost with more deals concluded in local market today. It is interesting to note that most traders contacted by CommoPlast reported better sales for homo-PP than PE recently with one source explained, “The agriculture film season should be over by mid of April and we believed that most buyers have already stocked up sufficient cargoes. Buyers are showing minimal interest at the current offer level, yet we do not expect any reduction in the near term given a big jump in upstream costs and a heavy maintenance shutdown schedule.”  

Another trader added, “We have suspended all offers toward the end of the trading days on the back of expected higher prices in the near term. We are not rushing to deplete on-hand cargoes as we think market still has room to move higher. Our customers are accepting local homo-PP even at CNY200/t ($31/t) higher than yesterday, and we think this trend might sustain till next month.”

In the import market, homo-PP prices have also gained $30-40/t compared to the beginning of the week and a trader in Guangdong said, “Our Middle Eastern supplier has lifted homo-PP injection offer to $1000/t CFR China TT in advance term and they managed to sell out available quantity. International seller therefore could continue to be firm on their cargoes as tight supply might defeat the declining upstream costs.”

Southeast Asian market ended the week on a firm note as most suppliers claimed limited supply and traders are expressing intention to implement further hike on their cargoes next week. Ethylene costs based on CFR Fareast Asia term added another $15/t to breech $1200/t threshold for the first time since mid-July 2015, fuelling expectation for a brighter outlook in the near term. A converter in Vietnam purchased Middle East HDPE film at $1190/t CIF, some $20/t higher than the last purchase two days ago said, “Our supplier informed that they only have 100 tons for us this time and next week they would offer at new prices. We still need some cargoes to cover production till end of Apr and we expect PE price to move above $1200/t threshold next week. Demand for our end product is regular.” Meanwhile, some production issues within the region are adding to the tightness in the market. In fact, players in Indonesia reported that they have not receiving many PE cargoes from Philippines and Thailand suppliers recently, which are expected to impact the local market once the preparation for Ramadan takes place. In Malaysia, domestic supply is also not that comfortable, according to buyers here. A trader reported, “One of local major producer is having production hiccup at their LLDPE line and they could only deliver HDPE cargoes after 23 March as a result of previous shutdown. The producer is also planning 10 days maintenance at their LDPE unit in May. Therefore, we think PE prices would continue the journey north in the near term.”

The PP market sees very limited number of offers from overseas supplier, however, buyers started to show more cautions as prices are now well above the $1000/t threshold. A trader in Vietnam commented, “We have purchased some Middle East cargoes at $1000/t CIF level, and we are not interested in anything higher than $1020/t. Propylene costs have reduced slight and we prefer to take more conservative stance over the market outlook in the coming month.” The Indonesian PP market continues to see tight supply condition while demand for homo-PP yarn and film is particularly strong.

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