Asia Daily PP and PE Overview 26 December 2017

CHINA

• Futures market surged, spot sentiment remains dull
• Buyers sideline on comfortable inventories

Polypropylene (PP)

Despite the dull sentiment, major local producers managed to deplete some inventories on hand, bring total PP and PE stock at main warehouses to approximate 600,000 tons, down 20,000 day on day. Many buyers claimed to have completed purchases for the year and at the moment only buy minimal quantity as prices soften. Spot offers drop CNY50/ton ($8/ton) from the previous session.

Surging futures market creates a gap of up to CNY200/ton ($31/ton) with spot market, which appears to be very attractive to arbitrage traders. “And therefore most cargoes takers are traders today,” a source said.

In the import market, prices at $1160/ton CFR China, LC AS term are facing difficulties in attracting buying interest, from which overseas suppliers are diverting cargoes to other destination for better margins. “Most of our customers only bids at $1130/ton which we think a bit too low at the moment. We are able to conclude at higher level in Southeast Asia,” an international trader said. 

Polyethylene (PE)

Import PE to the country is not responding to the firming upstream ethylene costs. Major Thailand producer cuts HDPE film offers twice today, totaling a reduction of $20/ton from last week, bringing latest offers to $1335/ton CFR China, LC AS term. The maker also cut LDPE film offers by $15/ton to $1190/ton with the same term. “Our customers are not even responding to the strengthening Chinese Yuan. Demand is a little disappointed, yet we do hope to see better condition in the coming week,” a distributor said.

There have been market talks that government approval for the first batch of plastics scrap import in 2018 would be less than 9500 tons, which is way below the same batch last year of more than 50,000 tons. This would continue shattering the recycle industry in the near term, or an indication of longer than expected firming HDPE market. No official confirmation from the authorities obtained at the time this report is published, however it is believed that this is the reason for futures market to firm up today.

Domestic offers for PE fell CNY50-100/ton ($8-15/ton) from the previous trading day.

SOUTHEAST ASIA

• Import HDPE film seems stagnant
• Vietnamese converters accepted higher homo-PP prices

Polypropylene (PP)

Vietnamese buyers continue accepting higher import homo-PP prices with Saudi Arabia cargoes concluded at $1180/ton CIF Vietnam, LC AS term, which is $10/ton increased from last week for the same origin. Just yet, only converters are interested in making fresh purchases at the mentioned prices while traders are very cautious pointing to unclear market direction in the medium term.

Better buying interest in Vietnam attract overseas sellers. Middle Eastern suppliers, who are not able to achieve satisfactory margins in China, decided to divert cargoes to Vietnam as buyers here accepted higher price levels. An international trader reported to have sold homo-PP cargoes from several Saudi suppliers at $1170/ton CIF Vietnam, LC AS term said, “Demand from converter is not too bad. We are not having large quantity and might introduce small hike in the next offering.”

Polyethylene (PE)

Major Saudi Arabia producer down adjusted HDPE film offers to the region by $10/ton from last month at $1290/ton CIF Southeast Asia, LC AS term. While Indonesian buyers are not showing strong interest, small deals at the offered level have been concluded in Vietnam. “Our customer is in need to bimodal HDPE cargoes, hence accepted the prices. Other buyers are placing bids at $1280/ton and currently waiting for the principal supplier feedback,” a distributor said.

Local producers in Indonesia continue to lift domestic PE offers by $20-30/ton week on week with limited supply and strong upstream costs remain the primary support for the price decision. Sentiment in domestic Indonesia is rather quiet as many buyers are away for the Christmas and New Year Holidays. Continuous surging local prices, especially on HDPE film cargoes has encouraged several buyers to seek re-export cargoes from neighboring markets, while other switching to recycle grade. “We only have a small quantity left of HDPE film, offering above the producer’s price list. Supply for LLDPE film is still sufficient. Our regular customers are in need to make purchases, yet only accept the previous levels. We plan to hold firm stance for now,” a trader informed.