Asia Daily PP PE Report 06 May 2016

In China, futures prices on Dalian Commodity Exchange finished the last trading day of the week at lower levels, marking the forth falling session in a row this week. Contract number 1609 for PP decreased CNY73/ton ($11/ton) to reach CNY6722/ton ($885/ton without VAT) and LLDPE contract settled at CNY110/ton ($17/ton) lower to reach CNY8145/ton ($1070/ton without VAT).

Domestic market is following futures trading closely, slashing another CNY50-100/ton ($8-16/ton) from yesterday for both PP and PE spot offers. Sentiment however is not picking up in line with the price reduction. A trader in Guangdong complained about an apparent slow down in demand for LLDPE film and LDPE film grade said, “Most of film makers are not satisfied with end product demand from which they become more cautious in making fresh replenishment. We are currently holding high costs cargoes at bonded warehouse, and we would likely insist firm stance in the near term to protect margins.”

Another trader added, “More homo-PP supply is coming as new plants started up. This might put more pressure on local market and therefore we prefer to be cautious in the near term.”

The Southeast Asian market remains quiet with little activities observed on the last trading day of the week. Most sellers are holding firm stance on their cargoes claiming limited supply, however, buyers are not showing great interest in making fresh purchased. A Thai producer lowered HDPE offers to Vietnam earlier this week by $10/t compared to last week at $1220/t CIF term said, “We received bid at as low as $1150/t with the same term, as buyers are citing high possibility of further reduction in the near term. We are not rushing to accept the bid since our breakeven is well above that level. Demand is very slow and we are not able to conclude desirable number of deal this week.”

Meanwhile, prices at the higher end of the overall range continue to come under pressure of stiff buyer resistance, from which sellers are committing to discounts to conclude deals. Indeed, a Malaysian producer reportedly sold 200 tons of LDPE film to Vietnam this week after reduced offers by as much as $40/t from last opening. Market is also seeing re-export Iranian LLDP film from China breached below $1200/t threshold to reach $1150-1165/t CIF Vietnam, LC AS term, arousing concern amongst market players.

Trading activities in the regional PP market appear to be stagnant and a number of deals are reported at discount. A distributor sold Middle Eastern homo-PP after agreed to $50-60/t reduction from initial offer level said, “We sell homo-PP yarn grade better than injection this month though demand is not as strong as expected. We have to agree to larger discount in spite of small allocation we have. Looking ahead, we are not very confident about the market outlook.”

Another international trader added, “Our principals are indicating intention to maintain stable to firm stance in the coming month. We personally see little support and therefore we plan to deplete on hand cargoes in the coming days. Buying interest is weak even there is room for negotiation.”

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