Asia Daily PP and PE Overview 26 February 2018

CHINA

• Agricultural film season begins to stimulate local demand for LLDPE film
• Moderate sales pressure observed in distribution market

Polypropylene (PP)

Total PP and PE inventories at domestic major producers’ warehouses rose to 1.03 million tons as of 26 February 2018. This level remains above the usual psychological threshold hold, yet way below the total inventories accumulated in the same period last year. Spot traders are offering up to CNY100/ton ($15/ton) discounts on deals given softer purchasing interest amid floppy futures trading.

There are very limited new offers in the import market and traders are attempting to mark up $10-20/ton on Indian homo-PP cargoes purchased in previous week at $1240/ton CFR China, LC 60 days term. “We see very limited interest as domestic cargoes traded in Eastern China at the moment are below this levels. If local market continue to inch lower, pressure is on import materials,” a trader commented.

Polyethylene (PE)

Demand for LLDPE film in contrast, is holding steady, especially in Northern China, where agricultural film season has just begun. Regular cargoes are currently transacted in the range CNY9350-9500/ton ($‎‎1264-1285/ton without VAT), EXW China, cash equivalent. “Sales for this grade have been smooth since market resumed trading late last week. We expect this trend to persist in the near term,” a trader said.

In the import ground, traders are discussing about the total inventories at Shanghai port that has reached nearly 350,000 tons throughout the Lunar New Year holidays. Cargoes clearance procedure is being carried out, however, there appears to be a certain degree of sales pressure associated with these parcels, which explained to trader’s willingness to offer discounts in domestic market in recent days.

No drastic movement is expected for the immediate term, just yet players are heavily concern about the falling ethylene costs and the market prospect after crude futures are officially up on Shanghai International Energy Exchange on 26 March 2018.

SOUTHEAST ASIA

• Falling ethylene cost concern PE buyers
• Import PP stable, local Indonesia market extended weakening trend

Polypropylene (PP)

Import offers from Middle Eastern suppliers remain very limited on the first trading day of the week, however other makers are holding very firm stance on the fresh price list. Buying interest has yet to show any sign of improvement; in contrast, demand condition in Indonesia is deteriorating. In fact, local traders continue cutting homo-PP offers by another IDR150,000/ton ($11/ton) from last week while producers are attempting to divert some quantity to nearby Vietnam market at $1310/ton CIF Vietnam, LC AS term.

At the meantime, South Korean homo-PP emerged at $1360/ton CIF Vietnam though the suppliers are collecting bids at $40/ton below initial price list. “We are very cautious at the moment given the sensitivity of the trend,” a converter said. 

Polyethylene (PE)

Major Saudi Arabia producer announced fresh offers for PE to Vietnam with $100/ton hike on HDPE film and $40/ton on LLDPE film to $1450/ton and $1280-1290/ton respectively, all based on CIF Vietnam, LC AS term. The offers received tremendous resistance given the fact that last shipment date is on 15 May, which means buyers would only receive the cargoes somewhere in July. “We decided not to pursue the purchases despite the limited quantity available. Price risk is too high while domestic market remains sluggish,” a local trader commented.

Another concerns discouraging buyers from entering deals for PE is the recent slump in upstream ethylene costs, a trend that is expected to persist in the near term. Heavy ethylene supply in Japan, in addition in continued available cargoes from Southeast Asia and Middle East might restrict ethylene market from any possible drastic rebound in the coming days.