Asia Daily PP and PE Overview 1 November 2017

In China, futures market appears to be heading for stabilisation given the minor reduction reported today. January delivery contract for PP settled at CNY8677/ton ($1122/ton without VAT), only CNY7/ton ($1/ton) reduced from the previous session. Meanwhile, LLDPE contract slipped CNY15/ton ($2/ton) to reach CNY9485/ton ($1226/ton without VAT).

Buyers continue making replenishment due ro low stock on hand, though remain very selective in term of prices. Traders are complaining about the difficulties in concluding deals after implemented CNY50-100/ton ($7-15/ton) increased on both PP and PE cargoes, as buyers are looking to the weakended furtures trading. A trader said, “Demand is still there as most converters are still operating at regular rate to fulfil peak end product orders.” The source added that a number of woven bag manufacturers they visited this week are having only one week worth of raw material inventory, which indicating the need to restock in the matter of days.

In the import ground, more players reported of getting cancelation for Iranian HDPE film due to disagreement on the new price formula and serious delay in shipment. Players are expecting a reduction on Iranian cargoes arrival for November and December as a result, which might keep market on the stable to firm track. “This make sense since most Iranian producers are operating at low rate still. Though Ilam and Mehr Petrochemical have restarted HDPE line, on-spec cargoes would only arrive market later this month,” a market source informed.

In Southeast Asia, there are very limited trading activities as both buyers and sellers continue to remain on the tug-of-war. Suppliers, especially for homo-PP refused giving any discounts to bring dutiable cargoes to below the $1150/ton threshold citing the lack of sales pressure.

“However, propylene costs are dropping and might continue to soften as demand in China is weak. We hope to make replenishment with at least $10/ton discount, just yet no supplier is agreeing to our bids,” a Vietnamese buyer received Omani homo-PP at $1150/ton CIF Vietnam, LC AS term, said.

Import PP market to Indonesia is facing relatively high competition from domestic traders, who have been giving attractive prices based on FD Indonesia, cash term. A converter purchased local parcels at $1205/ton with the same term informed, “Local prices are now lower than import offers for non-dutiable cargoes. We have been trying to ask for additional discounts, but unsuccessful, hence decided to purchase some quantity.”

Regional and international traders affirmed their positions by giving no ground, hoping that stronger energy complex would push market higher in the near term. Such belief is getting more intense across the region after a number of reports up-adjusted crude prices forecast in 2018. “Would there be any further cut on import homo-PP offers, we think it would only take place toward the end of the month and the reduction rate might not be too large. We are waiting for new offers from a Middle Eastern principal supplier, however many buyers are placing bids at as low as $1130/ton level,” a trader commented.

In the PE sector, buyers are more active in checking on HDPE film cargoes after Chinese buyers faced mass cancelling of Iranian parcels due to lack of supply and disagreement on the new price formula. “Chinese buyers would need to seek alternative cargoes to fill the supply gap, which might keep market firm in the near term. We think this condition might persist until first quarter of 2018, when the general supply become normalise,” a regional buyer commented.

Meanwhile, Malaysian buyers are not aggressive in restocking after a major domestic producer announced November delivery offers at a reduction of MYR50-150/ton ($12-35/ton) only for LDPE cargoes. A food packaging converter said, “Our end product order is regular. We are not planning to source beyond our need as high raw material price discourage large orders from our customers.”