Asia Daily PP and PE Overview 06 June 2016

In China, Dalian Commodity Exchange starts the new week on a firmer note with both contracts for PP and LLDPE settled higher. September delivery contract for PP inched up CNY51/ton ($8/ton) from last week to reach CNY6773/ton ($880/ton without VAT) while LLDPE contract closed at CNY8160/ton ($1060/ton without VAT), some CNY105/ton ($16/ton) higher.

Domestic spot offers for both PP and PE advanced CNY50-100/ton ($8-15/t) compared to last week on the back of improved futures trade. Players reported seeing better number of deal concluded; yet most buyers are procuring material in small quantity with caution. A trader in Dalian sold some quantity to local buyers said, “We are focusing on depleting on hand cargoes with the support from firming futures market. It is very difficult to gauge the likely market direction after the holiday, hence we prefer to hold conservative stance.”

Meanwhile, sellers active in the import PE market reported better number of enquiries for LDPE and LLDPE film from beverage packaging converters. A trader source from Guangzhou commented, “It is good knowing more buyers become active in the market though the real demand normally only come back in August-September period. We are watching the market cautiously with the approaching holidays and weakening monomers prices.”

Traders, who were forwarding selling import homo-PP cargoes last week at $860-870/ton CFR China find more support to hold firm on their prices now that several major plants are due to shutdown or reduce operation rate during the G20 Summit in early September 2016. In spite of perceived brighter medium term outlook, sellers are generally conservative about the market prospect in the coming week.

In Southeast Asia, import PP market has not seen any drastic movement from last week as most major suppliers are holding back their offers to monitor market movement before setting new prices. However, regional buyers believed that PP market is very near to the bottom, from which many are attempting the last negotiation before concluding deals. An Indonesian converter said, “Demand for our end products remain healthy, hence we need to purchase additional quantity to sustain production till quarter 3. We are now in talk with regional supplier for some cargoes, but we received very firm stance from the sellers."

Another Vietnamese buyer added, “Last Friday we only managed to purchase a small quantity of Middle Eastern homo-PP injection with $10/ton discount from initial offer level. Locally held imported homo-PP cargoes are not sufficient, hence we plan to make another small purchase this week. Domestic market is pretty steady with the arrival of previous high costs shipment that have had local trader stand firm on their prices. We hope to see better market condition in the coming days.”

Southeast Asian PE market is following mix direction, not in term of between countries, but between different PE grades. Indeed, tight LLDPE film supply stemming from production issues in major plants, is cushioning a firming sentiment despite ethylene costs has fallen to a three-month low last Friday at $1045/ton CFR S. Asia.

A Vietnamese buyer informed receiving Saudi Arabia LLDPE film offer for June delivery at $20/ton higher than initial prices, to reach $1170/ton CIF Vietnam, LC AS term. The source added, “Another Saudi Arabia supplier is also very firm on their cargoes at $1160/ton with the same term claiming tight availability. We are holding some previous cargoes at higher cost, and we prefer to wait for a while longer before offering to the market with hope to reduce loses.” Market also sees Iranian LLDPE film cargoes at $30/ton higher than last week at $1100/ton CIF Vietnam while supplier reportedly maintain firm stance on their cargoes without any intention to reduce prices on deals.

Elsewhere in the region, major Indonesian producers announced new prices for domestic buyers at approximate $20/ton reduction for LLDPE film and $30-35/ton lower for HDPE film compared to last week. Even with the latest price cut, market sees very little trading activities, as most buyers remain cautious about making fresh purchases amid traditional slow season for food packaging sector.

In the plant status news, Thailand’s PTT unexpectedly shutdown its LLDPE and LDPE units today due to technical failure, market sources reported. It remains unclear on the restart schedule. Meanwhile, the company’s 300,000 tons/year HDPE plant is currently operating at 60% capacity.  

Market participants, however are not convinced that the recent rebound in PP and LLDPE film prices could extent in a large range given expectation of weaker upstream costs in the near term, in line with the restart of several regional crackers.

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