Asia Daily PP PE Report 12 Apr 2016

In China, firming global crude oil prices has elevated the futures trading on Dalian Commodity Exchange for the second day in a row. Contract number 1609 for PP increased CNY39/t ($6/t) to reach CNY6817/t ($902/t without VAT) while LLDPE futures added CNY20/t ($3/t) to settle at CNY8325/t ($1011/t without VAT).

Firming crude oil and futures prices however did not cast adequate impact on the domestic spot market as local PP and PE prices continue to go down by another CNY50-100/t ($8-15/t) compared to yesterday. Weak buying interest is blamed to be the main culprit pulling domestic prices down. A converter in Fujian received local homo-PP offer at CNY7000/t ($925/t without VAT) EXW China, including VAT said, “Demand is not very healthy and our regular supplier is aggressive enough to offer larger discount to entice buying interest. We are holding comfortable stock levels and might only make additional purchases during the next downward cycle.”

The import market remains relatively quite with minimal number of homo-PP offers observed. A trader from Guangdong commented, “Most international sellers are not very attracted to the current weak demand condition in China from which they are diverting cargoes to other markets to gain better margins. Buyers are showing strong resistance towards the upper range of the overall offer. ChinaPlast and the Labor Day will disrupt trading activities and we think local inventories might pile up. We therefore do not feel so optimistic about the near term outlook.”

Traders offered PE are reportedly giving discount in order to stimulate trading activities, which many players translated to a sign of a peak out market. A trader from Linyi said, “Demand for LLDPE in local market is now off season, however we do expect some rebound before the ChinaPlast exhibition and market might turn quiet in May.”

In Southeast Asia, the general sentiment remains firm and with the current tight supply condition, market does not expect any significant swing in the near term. However, there are some signs of a peak out market observed in the region’s dumping ground – Vietnam as more and more re-export PE cargoes showed up here. A buyer received re-export offers for approximate 1200 tons of LLDPE film from various origins said, “Most of the origins are irregular hence buyers might need to consider before making purchases. We think that even Chinese traders are short selling now since these are cargoes are not at China bonded warehouse but only arrive in May. Domestic market is weakening and we believed that trading activities would remain limited till the first week of May.”

Meanwhile, a major Thailand producer maintained HDPE prices to Vietnam unchanged from last week at $1250/t CIF, LC AS term. Source from the producer informed, “Our allocation is still not that ample, yet we see buying interest is not there since the HDPE business is affected by the holiday season in neighboring country Cambodia. Besides, re-export cargoes are also widely available at the moment. Our regular buyers are complaining about slow domestic market, therefore they are not planning to replenish cargoes immediately.”

In the PP market, there is very limited number of offers observed in the market yet some Middle East homo-PP offers to Vietnam are reported at lower level compared to last week. A buyer received offers for this cargo at $10/t reduction from last offer at $1060/t CIF Vietnam said, “Buyers are not having confident in making fresh purchases amid weakening local prices. Indeed, locally held parcels are now more competitive than some of the import offers. We already have sufficient inventory hence not in rush to replenish this week.”

Persistent supply tightness in Indonesia is keeping the market very firm in spite of weaker buying interest. Some production issues within the country are squeezing out more from an already very tight market. Most of the players are now expecting higher offer levels from major local maker, yet many have expressed their low interest level in making fresh purchases.  

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