Asia Daily PP and PE Overview 23 July 2018

CHINA

• Steep depreciation of the Yuan continue discouraging demand for imports 
• Local demand curtailed as buyers resist higher prices 

Polypropylene (PP)

Stronger futures market and falling Chinese Yuan against the US dollar push spot offers for homo-PP higher; however, purchasing interest is just moving in the opposite direction. Converters, including those in the woven bag sector, started to slow down on replenishment citing thinning profit margins. 

“We used to enjoy much better bottom line and at the moment, it merely a breakeven. If prices continue to increase in the near term, we might have to cut operation rate to avoid harming our cash-flow,” a woven bag maker said.  

Polyethylene (PE)

The Chinese Yuan has depreciated almost 5 per cent since mid of June and there is no sign that the Chinese government would intervene in the market-driven process. Importers started feeling the pinch and sources have been voicing that a drop of $10-20/ton in import offers is only a reflection of the strengthening of the US dollar and show little attractiveness.

Major Saudi Arabia producer claimed having sold out LLDPE film allocation in the previous week and at the moment, open offers at $1130/ton CFR China, LC AS term. “There is price but no quantity available. In the meantime, we do not see any interest at the latest offers, and therefore, prefer to wait-and-see,” a market source said.      

SOUTHEAST ASIA 

• New offers emerged with reduction; demand hampered by exchange rate 
• Import LLDPE film face tightness due to production issues 

Polypropylene (PP)

Most Middle Eastern suppliers have not announced new offers to the region, however, Malaysian homo-PP slipped $60/ton month on month, to $1320/ton CIF Indonesia, LC AS term for August shipment. The initial market response is not very positive as buyers either concern over the currencies risk that makes the local market a safe heaven or looking at the mid to high $1200s for dutiable cargoes.

“Major Malaysian maker shall have the excess quantity for PP now that the new plant come online. We are in no rush to make replenishment unless manage to obtain better prices,” a buyer informed. 

Polyethylene (PE)

The import LLDPE film market is facing a tremendous risk of tightening supply after several major suppliers including Thailand’s PTT and Saudi’s Sharq encountered production disruption. “Supply for LLDPE C4 film Mi-2 might be short in August due to these shutdowns,” a market source said. However, players are not expecting any strong surge in offers considering the widely available of Indian materials at attractive prices. 

The continued depreciation of local currencies further tapers demand for imports across Asia. “We have received a memorandum from upper management to slow down purchases for imports and only consider important contract after the Vietnamese Dong plunged 1% against the US dollar today,” a buyer informed.