Asia Daily PP PE Report 22 Mar 2016

In China, futures prices on Dalian Commodity Exchange posted the first lose after more than a weeklong rally. Contract number 1605 for PP slashed CNY241/t ($37/t) while LLDPE futures is down CNY295/t ($45/t). Both contract settled at CNY7277/t ($958/t without VAT) and CNY9320/t ($1227/t without VAT) respectively.      

Physical spot offers for both PP and PE in local market defeated the losses seen in futures trading to add another CNY100/t ($15/t) today. However, traders started to give larger discount in an effort to stimulate buying interest after the Dalian Commodity Exchange sentiment went down. A trader based in Linyi commented, “The spot market does not respond immediately to the reduction in futures trading this time, but we decided to give additional CNY50/t discount to serious buyers. We are getting more purchase enquiries today and sales for homo-PP is still better than PE in general. We do expected some minor price correction in the near term given the speedy gain in the past weeks.”

Import offers are also gaining ground with a trader offering South African homo-PP at $1005/t LC 90 days term said, “We have not been able to conclude any deal at this level as most our customers are complaining about high import prices.” Similar to import PE market, buying interest is not very strong in spite of firming sentiment. A Shanghai based trader added, “We decided to lift our PE offers by $40/t compared to last week, however we are open to negotiation with our regular buyers. Customer’s respond wasn’t so positive and we think the higher end of the overall prices would meet strong buyer resistance. We remain cautious regarding the market outlook in the near term.”

In Southeast Asia, market is climbing to a totally new level of offers alongside with a fresh round of price announcements from international producers. In fact, a major Saudi Arabia maker implemented $100-120/t hike on their PE cargoes to Southeast Asia market for April shipment backing by limited supply and higher upstream costs. A Malaysian converter reported, “We received offer for a regular allocation and despite being informed about the general tightness in the market, we plan to negotiate for some discounts before conclude any deal. Demand for our end product is regular.” Meanwhile, Vietnamese players are not very receptive towards the new offer level taking the shipping time as a center of concern. “We think this offer level is a little too high and we might consider skip this round of replenishment. Ethylene costs might be firm now, but we expect supply to be loosened from May onwards. Medium term outlook therefore does not appear to us so positive.” Major Thai and Malaysian makers have also announced new offers to regional market as CommoPlast reported earlier today.

The PP market shared a similar sentiment and players reported a total disappearance of price below $1000/t level. Fresh offer from a Southeast Asian producer has reached $1170/t CIF Indonesia, LC AS term and surprised many market participants. An Indonesian converter reported, “Local PP supply is very tight, and therefore we received another $20/t upward adjustment from domestic producer today after some $40/t hike just a day ago. We have stocked up sufficient till end of April and we are not in rush to make additional purchase this week.” Vietnamese players meanwhile received $30-40/t hike for Saudi Arabia and Indian homo-PP cargoes compared to last week to reach $1060/t CIF term. A trader commented, “We are not planning to buy at this price as these cargoes shall only arrive in May, which we do not have a clear sight about the market direction. Local demand seems slow down a little compare to weeks earlier as buyers are not accepting higher prices.”

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