Asia Daily PP PE Report 19 May 2016

In China, futures prices on Dalian Commodity Exchange continue to weaken today, marking the fourth straight loosing session this week. Contract number 1609 for PP settled CNY150/ton ($23/ton) down at CNY6572/ton ($860/ton without VAT) while LLDPE contract slashed CNY85/ton ($13/ton) to reach CNY7930/ton ($1035/ton without VAT).

Persistent falling futures market has given domestic suppliers enough encouragement to cut PP offers by another CNY50/ton ($8/ton) from yesterday and CNY50-100/ton ($8-15/ton) for LLDPE film. However, buyers seem not willing to buy such small reduction, players reported. A trader in Guangdong commented on the domestic market demand said, “Buyers are not even interested to ask for offers. Most of our regular customers are waiting on the side-line claiming vague evidence to support firmer prices in the coming month even at the current crude price.”

In the import market, the overall price range of import homo-PP prices have not changed, yet offers at the upper end of the range are now facing pressure to step back. However, market participants are not expecting any significant reduction in PP prices consider the current supply tightness.

In Southeast Asia, buying appetite appears to fall back after a round of flash purchase observed in the PP market in the previous trading session. Buyers are now technically withdrawn to the sideline to monitor further development before making decision. A Vietnamese buyer purchased 100 tons of Saudi Arabia homo-PP yarn at $980/ton said, “This price is $10/ton lower than yesterday for the same grade. We plan to make another replenishment if more discount becomes available.” Several other buyers also reported to have procured some cargoes in the previous trading session, however, mostly in small quantity.

Import homo-PP prices from Middle East to Indonesia have breached below the $1000/ton threshold persistent weak demand in Indonesia and other major regional markets convince sellers to commit discounts. A buyer purchased the cargoes at $995/ton CIF Indonesia, LC AS term said, “We only replenished a small quantity of material as we believed that market might face more downward pressure during the fasting month in June. Local supply is still not sufficient, however, buyers are not in rush to buy additional quantity amid bearish expectation for end product demand.”

The PE market appears to be weaker than PP when it comes to purchasing activities as buyers are generally sharing the common expectation of bearish outlook. A regional producer reduced LDPE film prices to $1220/ton CIF Vietnam, LC AS term said, “We are not seeing much buying interest even after the reduction as there are more competitive offer available in the distribution market. We are having comfortable inventories at the moment and we plan to deplete the cargoes in the coming days.”

Players are expecting the current bearish sentiment to sustain through June, as fasting month in Muslim countries might deter strong buying interest, in spite of firm upstream value and tight supply condition. However, many are more optimistic about the demand condition during the second half of July.

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