Asia Daily PP and PE Overview 8 March 2018

CHINA

• Weak futures market depressed domestic spot ground
• Import PP holds firm position; PE loses grip on the trend

Polypropylene (PP)

Total PP and PE inventories at major domestic producers' warehouses fell only 20,000 tons to approximate 940,000 tons as of 8 March 2018, reflecting slower purchasing activities, especially from arbitrage traders. Spot offers to continue to witness CNY50-100/ton ($8-15/ton) reduction day on day, bring prices to CNY‎‎‎8900-9050/ton ($‎‎1204-1224/ton without VAT), EXW China, cash equivalent.

In contrast, overseas sellers are having no eager to match the soft sentiment in the domestic ground, riding on the back of tight availability. Many switches to do back-to-back transactions with regular buyers while diverting remaining quantity to other markets, where demand is better.  

Polyethylene (PE)

Import PE to the country remains soft, though it is important to note that prices are not falling significantly, thanks to the recent rebound in ethylene costs. “Upstream costs are firming up and we are in need to protect our profit margins. Import supply is not high due to maintenance shutdown and we expect to see better demand in Muslim markets ahead of Ramadan season,” a Saudi Arabia producer commented.

SOUTHEAST ASIA

• Market sentiment remains heavy, limited deals reported
• Surging ethylene costs have little impact on PE sector

Polypropylene (PP)

Purchasing activities across the region remain pretty subdue with a couple of suppliers voluntarily stepped back on the offers slightly with hope to attract buying interest while others are showing no intention to do so. In fact, a limited quantity of Middle Eastern homo-PP emerged in Indonesia at $10-20/ton lower than initial price list and deals have been realized at $1265-1270/ton CIF Indonesia, LC AS term. These cargoes have been sold out.

Regular Chinese homo-PP also witness $10/ton reduction day on day to $1280/ton FOB China, LC AS term with a trader said, "The previous prices are unable to attract any deal. Demand in Southeast Asia is weak while the local market in China continues to slide."

Regardless of these movements, major Saudi Arabia maker announced new homo-PP offers to Vietnam at $1315/ton CIF, LC AS term and bids coming in at $15/ton lower all have been rejected. "The producer is not having sales pressure given the on-going maintenance shutdown. We might wait further before making new buy," a converter said.   

Polyethylene (PE)

Ethylene costs surged strongly this week thanks to tightening supply and improved buying interest from Chinese buyers, who wish to stock up ahead of heavy maintenance shutdown season in Japan. However, the momentum might lose steam soon, industry participants said, citing the weakness in downstream PE market. South Korea's SK Global has already been planning for operating rate cuts at its PE units in April due to negative margins.

On a bright side, several converters and brand owners in Indonesia reported having received a better number of end product orders in preparation for the Ramadan, which takes place in June this year. "New orders increased 20 percent from last month and we hope to see continued improvement," a food packaging manufacturer said.