Asia Daily PP and PE Overview 26 May 2016

In China, futures prices on Dalian Commodity Exchange again concluded the trading day at mixed trend with LLDPE contract retreated from three consecutive days gains to settled CNY25/ton ($4/ton) lower at CNY8015/ton ($1044/ton without VAT). Contract number 1609 for PP meanwhile added CNY112/ton ($17/ton) to reach CNY6432/ton ($838/ton without VAT).

Domestic spot PP and PE cargoes remain largely stable to CNY50/ton ($8/ton) higher than yesterday amid lethargic demand. Players continue to claim limited supply for homo-PP yarn in which sellers maintain very firm stance on their cargoes. A trader from Guangdong reported, “We inquired for some homo-PP yarn cargoes today, however our supplier could not fulfil due to lack of ready inventories. At the meantime we only see demand for PPH film is healthy.”

Domestic players reported that Chinese authorities are planning to shut factories and implement road ban on heavy vehicles around Hangzhou area to reduce air pollution in preparation to welcome world leaders for G20 Summit on 4-5 September 2016. Similar to last year, the “air cleaning” activities shall take 12 days, starting 26 August to 6 September 2016, sources added. Market participants are expecting at least six PP plants around Hangzhou area with total capacity of 2.65 million tons/year to be shut during the summit, however there is no official guideline from municipal government on the required operation rate yet.  

Import market sustains the stable trend today as traders refused to give any additional discount on import homo-PP prices due to supply tightness. Couple of Middle Eastern producers has announced PE prices to China with reductions from last month and players are considering before committing fresh purchases.

In Southeast Asia, sentiment has not seen much improvement as the week proceed and deals are reported at discount, especially for PE cargoes. Regional players are showing concern about import HDPE film to Vietnam breached below $1100/ton threshold as a result of persistent weak demand. A buyers purchased Saudi HDPE film at $1080/ton CIF Vietnam, LC AS term, after obtain $40/ton discount from initial price said, “Demand for HDPE film in domestic market is very weak, and as the monsoon arrives, slower market is expected in the near term. We did not buy large quantity as near term outlook is rather cloudy.”  

Meanwhile, players in Malaysia are waiting for new prices from major domestic producer, however, most buyers are not expecting any significant reduction despite softer regional market at the background given weakened local currency. Besides, tight LLDPE supply stemming from unsettled plant issues also support the general sentiment. A buyer added, “We are looking for alternative cargoes from import market since prices are much more competitive. Demand for our end product is stable at the moment.”

The regional PP market has not witnessed any significant changes compared to yesterday, however, buyers are mostly expressed their wait and see stance, hoping to see further reduction in the near term. Sellers meanwhile portray less willingness in giving discount. Indeed, a Vietnamese buyer reported, “We requested for additional quantity after purchased 100 tons of Saudi homo-PP at $960/ton CIF, LC AS term, however, our supplier informed that they have withdrawn the offer today. Even our Indian supplier is very firm on their prices claiming limited supply. We are a little puzzled, however we plan to monitor further development before making decision.”

In domestic Indonesia market, there are some forward selling activities observed for homo-PP yarn at well below $1200/ton threshold based on FD, cash in advance term. However, buyers are still showing reluctance in buying large quantity claiming possibility of further price cut, considering the gap between propylene monomers and PP prices.  

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