Asia Daily PP PE Report 29 Mar 2016

In China, the futures prices on Dalian Commodity Exchange continue to loose steam ahead of a heavy maintenance shutdown season. Contract number 1605 for PP inched up CNY24/t ($4/t) to reach CNY7356/t ($967/t without VAT) while LLDPE contract slashed CNY60/t ($9/t) to settle at CNY9345/t ($1229/t without VAT).

Weakening futures trading has trimmed the cushion, which support continuous firming trend in local spot market in the past month, and only HDPE blow moulding grade advanced CNY50-100/t ($8-15/t) on the second trading day of the week. Sluggish buying interest is another factor that souring sentiment in Asia’s biggest market.

A trader in Xiamen said, “We couldn’t conclude any deal in local market today as buyers are resisting higher price level. Demand has weakened visibly and this might become worse in the coming days if futures market doesn’t improve. We are not confident in gauging the likely market direction in the medium term; however, we do think that prices might not have concrete support for another big jump.”  

A similar scenario is seen in the import market and many traders contacted by CommoPlast were expressing a deep disappointment with the current demand condition. A trader offer Saudi Arabia homo-PP at $1030/t CFR China, LC 90 days said, “We do not see any buying interest. The speedy firming trend has not been accompanied by demand despite traders are repeatedly regulating sales quantity in an already-very-tight supply condition. We are turning pessimistic regarding the outlook after ChinaPlast event.”

It is interesting to note that Iran is working to push more cargoes to China since its international sanctions were lifted, facilitating trade flow between the countries. In fact, data from Chinese Custom Department showed a five-folds increased in import LLDPE from Iran to China in the short working month of February compared to a month earlier. Iran therefore replaced United Arab Emirates as the fourth biggest LLDPE supplier to China, just behind Singapore, Saudi Arabia and Thailand.

In Southeast Asia, the persistent tight supply condition continues to push prices up, however, buyers are showing a clearer sign of hesitation towards making fresh purchases. Vietnamese players received offers for Saudi Arabia homo-PP at the $1100/t level based on CIF, LC AS term; yet respond is not very optimistic. A trader commented, “We found this offer a bit not so attractive due to the long shipping time. Local market is slowing down and buyers are resisting the current high price level. We are not very confident about the medium term outlook as volatile crude oil and weaker demand in the near-by China market might limit the extent of any price increases in the near term.” Meanwhile, limited supply for homo-PP in Indonesia is giving the peak seasonal peak demand a pinch in which local offers steadily firming up since beginning of Feb 2016. After a major local producer implemented some $20/t hike on their homo-PP cargoes at the beginning of the week, local traders are now offering cargoes at $25/t above the producer’s benchmark. A local trader commented, “We have oversold homo-PP allocation for March and hence we decided to lift offers higher than producer’s benchmark. Demand in local market remains healthy which might continue to support higher prices in the near term.”

The PE market witness higher offers from couple of regional suppliers, whom claimed limited cargoes. A major Thai maker issued $15/t hike on their HDPE film parcels to reach $1235/t CIF Vietnam LC AS term, and a source from the producer added, “We only have 100 tons of HDPE film this week and not others grades at the moment. Demand seems to be weaker and we are facing stiff competition from re-export cargoes.” Vietnamese buyers also received fresh offers for LDPE film from a Malaysian producer at $1310/t CIF term, some $180/t higher than last month’s level. Source close to the producer commented, “Due to the scheduled maintenance shutdown next month, we are having very limited quantity at the moment; however, our customers are not responding very well towards this new offer. We are also having more than 100 tons of HDPE film with no price yet. We are currently monitoring the HDPE market as it is a little cluttered these days.” Meanwhile, a major Saudi Arabia producer has lifted both PP and PE offers to India market, following the international trend.

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