Asia Daily PP PE Report 12 May 2016

In China, futures prices on Dalian Commodity Exchange finished a volatile trading day at stable to firmer levels. Contract 1609 for PP inched up CNY66/ton ($10/ton) from yesterday to closed at CNY6803/ton ($895/ton without VAT). Meanwhile, LLDPE futures settled at unchanged level from yesterday at CNY8205/ton ($1080/ton without VAT).

Domestic spot market sees another CNY50-100/ton ($8-16/ton) hike from the previous trading session for both PP and PE cargoes; however, traders are giving discounts in the face of slower demand compared to earlier this week. A trader in Guangdong commented, “Trading activities are slowing down and we elected to give some discounts to entice demand in spite of firmer price lists from local producers. We are taking cautious stance and not carrying optimism for the outlook in the next few weeks.”

In the import market, homo-PP prices continue to move lower, especially cargoes offered at the higher end of the overall range. In fact, a converter in Yantai received fresh Middle East homo-PP prices at $20/ton lower than the previous offering at $970/ton CFR China, LC 90 days term said, “We are not in rush to make additional purchases as demand for our end product is moving south. We are currently waiting on the sideline hoping to see softer prices in the near term.”

Import PE to China mostly have breached below the $1100/ton threshold as diminishing demand is weighting down on the market. Players are reporting the widely available of off-grade LLDPE film at competitive prices, which adds more pressure to the already lethargic market. Another trader added, “Iranian PE cargoes together with some irregular origins are now forming the lower end of the overall price range. It appears that traders, who are selling new Iranian grades, are trying to gain market share instead of profit margins, therefore buyers have more confidence to believe in continuous weakening trend in the near term.”

In Southeast Asia, buyers are shy away from making replenishment considering more aggressive moves by sellers in an attempt to attract buying interest. Indeed, regional PP market is carving the softening trend with Middle East and Indian origins touch the $1000/ton level, and in some part of the regional market, prices have breached below this threshold. A buyer reported, “Our supplier advised us they would give another $5/ton discount to settle deal at $995/ton for Middle Eastern cargoes based on CIF, LC AS term. We have no confidence right now despite some improvement is observed in the near-by China market. The downtrend has just started; hence we prefer to be on the sideline taking wait and see stance.”

Domestic prices in Vietnam and Indonesia also plunged in line with the international trend. A trader in Indonesia commented, “Demand is weak and buyers are placing bids at very unreasonable levels. We think the current weakening trend might be limited due to some regional plants shutdown, which might cap the availability. We are currently clearing backlogs and not in the position to give large discount.”

The PE market sees no better situation and LLDPE film once regarded as having relatively stronger stand than other grades with the support from supply tightness, is now falling. A converter purchased Middle East LLDPE film at $1170-1180/t CIF Vietnam, LC AS term said, “Our supplier informed that these are compliment cargoes to those high costs we purchased last month, however we are getting similar levels from other suppliers. We think there is still room for the market to move down further in the near term, therefore we only purchased a small quantity this time.”

HDPE market is apparently under stronger downward pressure with the availability of re-export cargoes from China at competitive levels, from which sellers are showing intention to give discount for serious buyers.

In the Production Status, Japan’s Mitsubishi brought its naphtha cracker off-stream on Monday, 9 May 2016 for annual maintenance work. Based in Kashima, Japan, the cracker produces 540,000 tons/year of ethylene and 260,000 tons/year of propylene. This is the second cracker in the country go offline this week after Maruzen Petrochemical.

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