Asia Daily PP and PE Overview 23 May 2016

In China, the loses seen in futures trading last week dragged into first trading day of the new week with contract number 1609 for PP slashed CNY195/ton ($30/ton) while LLDPE futures subtract CNY120/ton ($18/ton) from last trading session. Both contract settled at CNY6385/ton ($833/ton without VAT) and CNY7860/ton ($1025/ton without VAT) respectively.

Physical spot offers for both PP and PE in domestic market see another CNY50/ton ($8/ton) reduction as the impact from weakening futures market persist. Traders are complaining about the difficulties they face in concluding deals as buyers become less active in the market, hoping to obtain better deals in the coming days. Weakening futures market has also impacted the coal based auction result in which only 55% of the total auction volume for PP was sold in today’s session

A converter in Chongqing bought some domestic homo-PP cargoes said, “We temporary suspended importing material for the fact that local cargoes are much more competitive in term of prices and delivery time. This has also given us more space to plan for inventories amid mediocre end product demand.”

In the import market, a major Indian producer cut official offers for homo-PP cargoes deems for July delivery by $40/ton from last week to reach $910/ton CFR China, LC 30 days term. Even with the latest discount, many players are not convinced that the market is reaching the bottom with a source commented, “Buyers continue to purchase hand to mouth basis. Our regular customers even express buy idea at below $900/ton threshold, in which we feel very concern about the near term outlook.”

Import PE cargoes from Thailand also see downward adjustment as prices at the upper end of the overall prices range face tough time attracting buying interest. Latest price list from Thailand major indicates some $40/ton reduction for LLDPE film and $15/ton lower for HDPE parcels.

In Southeast Asia, trading activities remain muted despite number of fresh offers given by sellers at stable to softer levels compared to last week. Indeed, a major Thailand producer open fresh HDPE offers to Vietnam market at $20/ton reduction from last week to reach $1150/ton for film, injection, blow moulding and yarn grades, all based on CIF, LC AS term. Source from the producer reported, “Demand in Vietnam is very disappointed as buyers mostly retreated to the side-line, avoid participating in purchases. We are now waiting for buyer’s respond before deciding on further move.”

Another regional buyer receive Malaysian HDPE film offer at $1160/t CIF Philippines, LC AS term commented, “Import prices has plunged more than $100/ton in the span of less than a month. We are not very comfortable with the current market trend. Demand in Philippines is also not that great, and we might only replenish a small quantity while monitor further development before committing to larger purchases.”

Regional players reported seeing a slower pace in LLDPE film price erosion given relatively tighter supplier than other grades. However, as monsoon is hitting part of Southeast Asia market, demand might be dampened in the near term.

In the PP market, several suppliers have opened new offers at unchanged level from last week given strong upstream costs and tight availability. However, buyers are neither convinced about the sustainability of a stable trend nor become optimistic about the near term outlook. An Indonesian converter said, “Local producer has down adjusted homo-PP yarn and injection prices by $30/ton today, yet we received more competitive prices from distribution market. We are holding two months worth of inventories; hence we have no plan to make any purchases in the coming days. The local currency is weakening and this might impact buying appetite in Indonesia.”

Philippines buyers are also reported slower demand ahead of the monsoon season with a converter stated, “Demand for our end product is softer now, that we are not in rush to make fresh purchases. Local market should see a gradual slow down before the monsoon start in July.”

In the Plant Status news, South Korea’s Lotte Chemical reportedly operating its naphtha cracker at 75% capacity after completed maintenance work early this month. Market sources added that the plant might need to remain operating at low rate for at least two weeks. The cracker has a production capacity of 1 million ton/year of ethylene and 480,000 ton/year of propylene.

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