Asia Daily PP and PE Overview 26 March 2018

CHINA

• Local PP, PE inventories rose 65,000 tons over the weekend
• Limited trading activities amid trade tension and crude futures launching

Polypropylene (PP)

Total PP and PE inventories at major domestic producers’ warehouses surged 65,000 tons over the weekend to 965,000 tons as of 26 March 2018. Purchasing activities remain sloppy in the local market, from which traders continue to offer CNY50-100/ton ($8-16/ton) discount on homo-PP cargoes in order to smoothen sales process. Domestic cargoes currently stand in the range CNY8400-8750/ton ($1144-1192/ton without VAT), EXW China, cash equivalent.

Import offers below the $1200/ton threshold have not repeated on the first trading day of the week. In contrary, suppliers for Middle Eastern cargoes hold firm at $1210/ton CFR China, LC AS term. It is clearly difficult to conclude deals at this price level considering competitive local cargoes.

Polyethylene (PE)

Chinese traders reported having a better number of deals for LLDPE film to Northern buyers after conceding to additional discount today. Mulch film converters are enjoying improved profit margins amid falling raw material prices. “And the agricultural film season might extend till end of April, hence we hope demand would remain resilient in the coming week,” a trader commented.

Players are very cautious regarding the trade tension between China and USA despite news that the two countries are quietly discussing the solutions. In another development, China has officially launched crude oil futures on Shanghai International Energy Exchange INE. The petrochemical market is still monitoring for potential impact from the new crude oil contract.

SOUTHEAST ASIA

• Limited trading activities on the first trading day of the week
• Market expects the current downtrend to persist

Polypropylene (PP)

There are very limited activities on the first trading day of the week and most international suppliers prefer to collect bids instead of giving concrete offers. Meanwhile, regional buyers are expecting an additional reduction to emerge following the latest fall in import homo-PP to China late last week.

Local homo-PP in Vietnam fell approximate VND300,000/ton ($13/ton) week on week to VND32,200,000-32,400,000/ton ($‎1283-1290/ton without VAT), FD Vietnam, cash equivalent. Yet, buyers remain irresponsive citing the lack of end product orders. “We think the down-trend has just only started and prefer to hold a wait and see position for now. The macro environment is not conductive, which overshadowed the support from stronger energy complex,” a woven bag maker informed. 

Polyethylene (PE)

Similar to the PP market, Southeast Asian buyers are very conservative about replenishing PE cargoes either from local or import market. Local PE offers in both Vietnam and Indonesia are moving lower. While supply for HDPE film in Vietnam remains relatively tight, many large-scale traders in the country are holding a comfortable stock for LLDPE film. “Demand is extremely slow. At the current prices, we manage to breakeven for on hand cargoes. However, if prices continue to slide, we are technically making loses. Demand might only pick up if China started to replenish material,” a trader said.

In spite of price cuts from a major domestic producer, traders in Indonesia are attempting to maintain offers for PE cargoes. “This is not working, given the current demand condition,” a converter reported. In fact, Thai major is planning to announce weekly offers to Indonesia and there have been indications that the producer might step back on HDPE prices.