Asia Daily PP and PE Overview 19 December 2017

CHINA

• Buyers active in replenishing import LDPE film cargoes
• Sentiment seems improved in both domestic and import ground

Polypropylene (PP)

Traders suspended all discounts schemes given in the previous session, in line with strengthening futures market. It is reported that the number of deals concluded in local market appears to be better though most cargoes takers are still traders. Meanwhile, converters are reacting very calmly towards the new development under the pressure to keep low inventories at the year-end season.

Certain areas in China are facing tightening homo-PP yarn supply as producers switch to make injection grade for better margins. “This condition is not expect to persist as our supplier has informed about plan to switch back to raffia production in the coming week,” a converter said.

Import homo-PP to China from dutiable origins at $1130/ton has not repeated in the first two trading day of the week. The lower end of the overall price range inched slightly higher to $1140-1150/ton CFR China, LC 0-90 days term. Buyers have yet to accept the possibility that market has moved higher with a converter said, “We remain cautious. At the moment, we are discussing with a regular Middle Eastern producer to obtain special discount on deals.”

Polyethylene (PE)

It is interesting that purchasing activities for import LDPE film in the country witness a visible pick up with many believed that market is nearing the bottom after nearly fifteen weeks of constant falling. A good number of deals for LDPE film originated from India, Russia, Brazil and even small quantity from USA are observed in the range $1120-1150/ton CFR China, LC 0-60 days term. A trader said, “We feel that these prices are very competitive as they are even lower than current LLDPE film offers. Real demand from converter is still mediocre, and we hope to see better condition in the coming month with pre-Lunar New Year replenishment activities.”

In domestic market, traders conceded to CNY50-100/ton ($8-15/ton) price cut on all PE grades, in turn, see active come back from buyers, especially in the Northern China side. A trader sold 1300 tons of LLDPE film to agricultural film maker added, “Import arrival in the first quarter 2018 might not be as high as market initially expected. It makes sense for converters to make replenishment now before prices firmed up.”  

SOUTHEAST ASIA

• Cautious buyers enter negotiation for January shipment
• Suppliers might face difficulties achieving hike target

Polypropylene (PP)

Market remains firm though very limited number of real transactions observed. Firming propylene (C3) due to tightened supply is expected to provide necessary support from the costs side, which reinforce supplier’s position. Regional buyers are complaining about difficulties facing in obtaining discounts on deals this week. “We are trying to place bids at $1150/ton, yet received rejection almost immediately. End product demand is a bit weaker than expected and we have lose several export tenders to Vietnamese suppliers due to un-competitiveness,” a woven bag manufacturer received offers for Saudi homo-PP at $1170-1180/ton CIF Indonesia, informed.

There has not been any bold indication of a downtrend ahead despite the mediocre purchasing activities condition. “If prices continue to go up, we might switch to hand-to-mouth buying strategy. At the moment, we are covered throughout February,” a Vietnamese buyer added.

Polyethylene (PE)

Several regional and international producers announced fresh offers with up to $60/ton increased month on month and HDPE continue holding a premium of $100/ton over LLDPE film. However, buyers are not responding very positively towards the latest offers with many plan to place bids at the last done-deal levels. Such stiff resistance might hurdle suppliers from achieving the full hike target.

A Saudi Arabia producer opens new offers at $1190-1200/ton for LLDPE film and $1290/ton for HDPE film, all based on CIF Vietnam, LC AS term and buyers are demanding for $30-40/ton discounts. “Demand for HDPE film is not as strong as it was in late November. We do not expect buyer to accept latest offers,” a source said. In fact, domestic traders started to concentrate on depleting inventories for both LLDPE and HDPE film, causing dull sentiment in local ground this week though prices have yet to witness major changes. Buyers in the country become less optimistic about the medium term outlook, fearing that market would turn south in the post Lunar New Year period.

Southeast Asia market is experiencing a heavy influx of Indian PE cargoes at relatively competitive levels. These cargoes focused primarily on LLDPE, HDPE yarn and LDPE film grades. Such aggressive stance might cause the current firming trend to loose momentum, sources fear.