Asia Daily PP and PE Overview 03 June 2016

In China, futures prices on Dalian Commodity Exchange reversed the weakening trend record in the past two sessions to make a considerable jump on the last trading day. Contract 1609 for PP settled CNY137/ton ($21/ton) higher at CNY6777/ton ($880/ton without VAT). LLDPE futures meanwhile settled at CNY8135/ton ($1057/ton without VAT), some CNY145/ton ($22/ton) higher than yesterday.

Physical spot offers for both PP and PE in domestic market continue to advance with the support from increasing futures trade as producers open new price list at CNY50/ton ($8/ton) higher than the previous day. This against the fact that buying interest is diminishing ahead of the Dragon Boat holidays starting 9-11 June. A trader from Xiamen reported, “There are still some small purchases but we are not expecting any abrupt movement in the near term. We prefer to skip our replenishment this week to monitor the demand prospect after the holiday before taking position.”    

Market also received additional information from government regarding the operational quota for each petrochemical plant in Hangzhou and Shanghai during G20 Summit from 4-5 September 2016. An updated version of the news is now available on commoplast.com, in addition to the earlier report on 26 May 2016.

Import homo-PP market sees little movement with most prompt cargoes still holding above the $900/ton threshold. Weakening Chinese Yuan and lack of buyer’s confidence for the medium term outlook have dampened buying interest for deep-seas cargoes. Several traders have expressed their willingness to negotiate with serious buyers to close deal.

Import PE to the country meanwhile witness a new low with the emergence of Iranian LLDPE film cargoes at $1020-1030/ton CFR China, LC AS term. A trader in Shanghai said, “Buyers can still place firm bid before close deal. We expected slower sentiment in the coming week given shorter working days, therefore, we prefer to remain conservative about the market prospect.”

In Southeast Asia, the vague sign of a stronger buying interest for homo-PP detected earlier is now becoming clearer, as buyers are seeking to replenish some small quantity amid tight availability. In Vietnam, a major Middle Eastern producer surprised the market by giving new offer for import homo-PP during the end of the week at $970/ton, CIF, LC AS term. A market source informed, “The supplier managed to sell out at $950-960/ton with the same term, some $10-20/ton higher than the concluded prices for the same cargo earlier this week. It seems the market has determined its direction to rebound from the recent downtrend, for that we think prices might follow stable to firm trend in the coming week.” Market participants also reported a slight pick up in local demand, which support more stable prices this couple of days.

A regional trader offers Vietnamese homo-PP to Indonesia at $1030-1040/ton, CIF, LC AS term said, “Many of our regular customers have sent in their inquiries at $30/ton lower with the same term, however, we are not in the position to reduce prices in such large extent given lack of quantity. We prefer to hold firm on our cargoes with expectation that market is reaching the bottom soon.”

Weakening ethylene costs meanwhile did not give PE market such support to regain the balance, except for LLDPE film grade. Indeed, regional buyers have not seen any improvement in LLDPE film supply with the production issues at some major plants. At the same time, a Thailand producer withdrew their HDPE offers to Vietnam after down adjusted prices by $15/ton to reach $1120/ton CIF term for July delivery shipment. A buyer commented, “Demand for HDPE is local market is not as strong as other grade at the moment while supply is rather comfortable, therefore we think there might still be some room for prices to go down further. We are monitoring market development before making some purchases.”

In the nearby Malaysia and Indonesia market, converters are rushing for the last end-product orders before the Ramadan holidays, from which buying activities are kept to the minimal. Domestic sellers are apparently facing some difficulties in selling on-hand parcels to packaging converters. A market source in Indonesia reported, “There might be some downward adjustment from local producer in the coming week as supplier depleting inventories before the holidays. Trade has been slow here and buyers simply stick to the wait and see attitude.”

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