Asia Daily PP PE Report 23 Mar 2016

In China, futures prices on Dalian Commodity Exchange extended the weakening trend today with both PP and PE contract settled at slightly lower level compared to the pervious trading session. Contract number 1605 for May delivery reduced CNY71/t ($10/t) to reach CNY7245/t ($952/t without VAT) for PP, while LLDPE edged CNY85/t ($13/t) lower to close at CNY9285/t ($1221/t without VAT).

Spot offers in domestic market remain mostly stable during the firs half of the trading day, however trader elected to give CNY50/t ($8/t) discount on both PP and PE cargoes given uncertain market outlook despite sellers reportedly achieve more deals today. LLDPE film supply in domestic market once again receives a boost when Sinopec has given official announcement regarding allocation cut to each market area. A trader from Linyi reported, “Our supplier recently cut LLDPE film allocation to Fujian and Shantou by 25% and to other areas by 15%. In addition to some scheduled shutdown in the coming month, we expect the firming trend would sustain in the near term. We are monitoring the demand from agriculture sector in order to have a clearer market direction.” Sales for homo-PP continue to pick up in domestic market with attractive discounts seem spreading the effect on buying interest.

In the import market, traders have introduced additional hike on Saudi Arabia homo-PP cargoes to reach $1020/t CFR China, LC 60 days term. A trader based in Ningbo commented, “Buyers are not showing great interest in the current price levels, however we believed that the market would still be heading north considering such limited number of import offers recently.” 

Buyers in the import PE market appear to be lack of appetite for making fresh purchases, especially HDPE film. Couple of overseas producers have lifted offers to China today, including Taiwanese HDPE cargoes at $1200-1220/t CFR term, yet buyers are not in the position to negotiate pointing to the lack of confidence in the medium term outlook. Some sellers are seeking for opportunity to re-export on hand cargoes with a Shanghai based trader said, “We are planning to re-export some HDPE film to Southeast Asia market since demand here is not encouraging. HDPE is currently the weakest among all the grades, hence its prices are more stable.”      

In Southeast Asia, the firming sentiment has not changed with limited supply from major international PP and PE makers remained the primary support at the background. The PE market started to receive new offers for April shipment and buyers are now in the process of negotiating. In Vietnam, a buyer was offered Saudi HDPE film and LLDPE film at $1220-1230/t/ CIF term said, “We placed bid for HDPE cargoes at $40/t lower than the initial offer level. For LLDPE film, our suppliers informed that they have very limited quantity; therefore, they have no plan to give any discount. We think that the probability of not making profit on these cargoes when it arrive in May is very high.” Meanwhile, some technical issues and scheduled maintenance shutdown in Malaysia has been keeping LLDPE supply very tight in this market. An industry source reported, “Our principal informed that they are not able to allocate any HDPE and LLDPE for export in first half of the year and only a small quantity of LDPE is available. We expect the supply would only be able to catch a breath from June onwards.” Meanwhile, players reported a considerable number of re-export HDPE film offers from China to Vietnam today, signalling a possibility of reduced buying interest for this grade in the nearby China market. Vietnamese buyers are not very eager with these cargoes given high price level, however, promptness appears to counterbalance the costs.

The PP market tensed up as Indonesian buyers received announcement from a major Thai producer regarding the non-availability of homo-PP cargoes for April and May delivery. A buyer in the country added, “Local spot supply is also not very comfortable as we can’t even purchase more than 200 tons each time now. We were initially expected for some relief in May, however we might need to plan our replenishment again after received announcement from regular Thai supplier.” Thai players are also struggling with limited availability in domestic market as a result of switch in production focus and technical issues at couple of major PP plants. Another major Philippines producer also reported inability to spare any export quantity until Jun 2016 in order to fulfil previous orders and to carry out a maintenance shutdown in May. Market players therefore are presuming a longer than expected tight supply condition within Southeast Asian market, considering another major shutdown in Singapore this coming July 2016.

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