Asia Daily PP PE Report 20 May 2016

In China, futures prices on Dalian Commodity Exchange ended a loosing week on a mixed result with contract number 1609 continue to edge down CNY66/ton ($10/ton) to settle at CNY6536/ton ($853/ton without VAT), market five consecutive falling sessions this week. September delivery contract for LLDPE meanwhile reversed the previous loses to settle CNY35/ton higher at CNY7970/ton ($1040/ton without VAT).

Domestic spot offers for both PP and PE remained stable to CNY50/ton ($8/ton) weaker with several traders claimed to have better sales results for homo-PP in domestic market than the rest of the week. Sources attributed the slight pick up in demand to continuous supply tightness and low on-hand inventories at converter’s side. A trader in Hebei commented, “Our buyers returned for some small purchase, however it seems they are still not having confidence to procure larger quantity.” Sources added that domestic producers are planning to lift local homo-PP offers in the near term given limited availability, however, traders are not buying this cited seeing no sign of improvement in demand.

Shenhua’s auction for coal based cargoes pick up today with 84% sold out for PP while LLDPE sales remain disappointed at 0% quantity taken by buyers.

In the import market, a major Middle Eastern producer announced new PE prices to China at below $1100/t threshold for all grades available, arousing expectation among buyers that import PE cargoes might be heading for the $1000/ton levels. Detailed new offers from the producers are reported on our Daily Price section on www.commoplast.com. Another trader in Shanghai is trying to deplete on hand cargoes by giving $10-20/ton discount on their PE parcels. The source added, “We see the distribution market is racing to cut prices to attract buying attention. This is some thing that we are not desirable and for this we are loosing confidence in the near term market prospect.”

In Southeast Asia, buying interest fall back on the last trading day of the week as buyers withdraw to the side-line waiting to see further development. There is very limited number of deal reported with several regional producers announced new PE prices with reduction. Indeed, a major Malaysian maker opens new HDPE film and LDPE film prices to Vietnam at $20/ton decreased from last month to reach $1180/ton and $1280/ton respectively. However, stronger than expected market resistance has the producer committed to additional $60/ton cut on LDPE film prices to conclude deal. A buyer commented, “We might purchase a mall quantity to maintain relationship however, we are not expecting to make large profit margins out of this cargoes since local demand is weaning. Our previous shipment at above $1300/ton level is arriving and we might need to hold for a while to minimise loses.”

Meanwhile, another Thailand producer offered HDPE film at $95/ton reduction from last week’s initial offer to reach $1115/ton CIF Vietnam, LC AS term. Yet, the producer reportedly withdrew the offer on the same day without concluding any deals. This could be a pressure point for other suppliers to lower their prices, market sources said.

Indonesian players are witnessing similar situation though the downtrend is taking much slower pace. This, however, does not comfort traders who are being squeezed by high costs inventories and stagnant trading activities. A source said, “We are reducing prices on a daily basis this week, yet buying interest is very limited. The fasting month is around the corner; hence we think market might only revive by second half of July. At the meantime, we think that producer might reduce operation rate if making PE continue to yield negative margins.”

Regional PP market ended a turbulence week on a relatively stable trend and many buyers are now prefer to wait on the side-line hoping to get better deals in the coming week. An Indonesian buyer received offers for Saudi Arabia homo-PP at $1000/ton CIF Indonesia, LC AS term added, “We placed bid at $40/ton lower, but our supplier did not accept. We are still having sufficient inventories at the moment; therefore we might wait further before making replenishment.”

In the Plant Status news, Saudi’s PetroRabigh experienced power outage at its plant yesterday, 19 May 2016. At the moment, it is unclear on how long the plant would remain offline, however industry participants raise estimation of at least 10 days off-line before the company could resume production.

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