Asia Daily PP and PE Overview 31 May 2016

In China, futures prices on Dalian Commodity Exchange continue to increase on the second trading day of the week with contract number 1609 advanced CNY201/ton ($31/ton) to settle at CNY6700/ton ($870/ton) without VAT. LLDPE contract meanwhile added CNY155/ton ($24/ton) to reach CNY8105/ton ($1053/ton without VAT).

With the psychological support from firming futures trade, domestic spot PP and PE offers remain largely stable to CNY50/ton ($9/ton) higher than yesterday, however, buyers begin to show a certain degree of resistance towards the latest offers from local sellers. A trader commented, “Our customers are showing less interest in making purchases after continuous price increment in the past few days. We are not holding high inventory at the moment, however, we believed domestic stocks should increase after the Dragon Boat Festival holidays.”

In the import market, players active in the PP business reported about the availability of Middle East off-grade homo-PP raffia at below $900/ton level; while prime cargoes hold very firm on the stable trend for the second week now. A trader in Zhejiang said, “We are offering some Middle East homo-PP cargoes however market respond is not as good as expected. Buyers are refraining from buying import cargoes given weakening Chinese Yuan and uncertain market outlook.” The source expects local homo-PP yarn supply to increase in the near term in line with the restart of major domestic plants.

Import PE to China in contrast continues to move lower with a major Thai maker implements fresh reduction this week on their cargoes. However, the extent of price reduction is rather limited at $5-10/ton with the support from the absence of sales pressure stemming from production issues.   

In Southeast Asia, sentiment has not seen any significant improvement as the week proceeds with most buyers remain cautious when it comes to fresh purchases. Couples of major producers have down adjusted their prices with aim to stimulate buying interest. Indeed, a major Thailand producer open new HDPE prices to Vietnam at $15/ton lower than last week to reach $1135/ton CIF, LC AS term. Source from the producer informed, “We have less allocation this week as our HQ is diverting cargoes to other market. We received more enquiries from buyers today, however, most customers are very reluctant when it comes to negotiate for deals.” Meanwhile, another regional producer is also reportedly stepped back on their PP and LDPE prices $20/ton from initial offer for June shipment given last week.

Another Middle Eastern producer offer LLDPE film at $1120-1130/ton to Southeast Asia market said, “Though our prices stand at the lower end of the overall market range, we see very limited number of orders. At the moment, we are not very certain about the near term outlook, therefore we plan to monitor further development before making additional move.”

In the PP market, supply and prices continue to move in opposite direction as a number of deals are reported at discount from the initial offer level. An Indonesian converter purchased Vietnamese homo-PP at $1040/ton CIF, LC AS term, some $20/ton lower than yesterday said, “Demand for our end product is regular at the moment therefore we plan to replenish additional quantity given tight local supply and firm energy market.”

In the nearby Vietnam market, buyers have concluded deals for Saudi Arabia homo-PP yarn at $940/ton CIF, LC AS term. A buyer informed, “We sent in inquiries to purchase some cargoes, however our supplier has sold out this week allocation. We see market are actively seeking for cargoes at similar level as they believed that supply tightness might prevent any nose-dive in the coming days.”

Regional market participants are also raising concern regarding the worker strike in France, which forced several petrochemical plants to declare emergency shutdown. Three major plants in the country went offline for this reason with total capacity of 600,000 tons/year of PP and 850,000 tons/year of PE. Players are speculating about an arbitrage opportunity in which Middle Eastern producers might find it more attractive to divert cargoes to fulfill the production loss in Europe instead of concentrating on stagnant Asia market.

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