Asia Daily PP and PE Overview 13 October 2017

In China, futures market made impressive rebound on the final trading day of the week jumping about 3.3-3.8% from the previous session. PP contract added CNY324/ton ($49/ton) to reach CNY8958/ton ($1162/ton without VAT) while LLDPE settled at CNY310/ton ($47/ton) higher at CNY9720/ton ($1261/ton without VAT).

The drastic movement in futures trading gives spot market sentiment a boost. Offers for both PP and PE immediately firm up CNY150/ton ($15/ton) day on day and arbitrage traders become active. In contrast, converters are taking a break to monitor further development. “This is a good sign and we think converters would have to come back next week to make additional replenishment due to low stock on hand. The preparation for the year-end festive season is still on going and we remain confident about the near term outlook,” a trader commented.

In the import market, HDPE film supply remains tight, which support many international sellers to hold firm stance on these cargoes. Offers for Taiwanese HDPE film stands in the range $1300-1305/ton CFR China, LC AS term, which players considered to be above acceptance levels and limited deals reported. “Even Middle Eastern HDPE film cargoes are $20-30/ton higher than the beginning of the week, reaching $1250/ton CFR China, however, we did not proceed further given the more competitive local cargoes,” a trader said.

Some long delayed Iranian HDPE parcels started to have shipment schedule to arrive within November. Supply is expected to ease slightly with a trader said, “We do not see any major impact on the pricing as these cargoes are set to arrive gradually.”

In Southeast Asia, there are little changes in term of the general sentiment. Buyers are still waiting on the sideline, believing that more price reduction is just week(s) ahead. South Korean homo-PP cargoes are concluded at $1180/ton CIF Vietnam, LC AS term, slightly above the bid levels collected in the previous trading day.

“Though the final prices do not match the bid, it is enough to put many other dutiable cargoes under pressure. We decided to wait for another round of price reduction before making replenishment,” a Vietnamese trader said.

In fact, suppliers for Saudi Arabia and Indian cargoes are voicing difficulties facing in attracting buying interest as buyers becoming more reluctant now. An international trader offer Saudi Arabia cargoes at $1160/ton to Vietnam, a $20/ton drop from last week. The source added, “Buyers are placing bid at below $1150/ton threshold citing the availability of competitive South Korean material. We might not reduce offers so quickly due to limited supply, however, the pressure is there.”

Regular Chinese homo-PP started appearing in Indonesia and Vietnam at $1210-1230/ton CIF term. The quantity available is still small considering the current supply-demand condition in domestic China market, “However, if the cargoes continue to appear in the market, buyers might develop a perception about the near term outlook,” another market source commented.

At the meantime, suppliers refused to enter price negotiation for HDPE film claiming supply shortage and healthy demand from Chinese buyers. Several Middle Eastern producers have actually implemented small hike of $10/ton on HDPE film offers to Vietnam. “We sold some Saudi cargoes in the previous week at $1220/ton and this week our principal supplier insist on $1230/ton level. Buyers are not accepting the increment, however, there are very limited choices,” an international trader commented. Even Philippines HDPE film is firm at $1220/ton CIF Vietnam as the supplier rejected any lower bids.

Market players are suggesting that the tightness in HDPE film supply could be due to the surge in demand for prime grade from China after the ban of importing plastic scraps came to effect that shake the country’s recycled industry. This condition is expected to persist in the near term unless Iranian HDPE cargoes started to come on regular basis again.