Asia Daily PP and PE Overview 08 June 2016

In China, Dalian Commodity Exchange conclude the last trading day of the week before the holidays at higher level as speculation on September delivery contracts continue to focus on production status during the G20 Summit. PP futures advanced CNY73/ton ($11/ton) to reach CNY6833/ton ($889/ton without VAT) while LLDPE futures inched up CNY55/ton ($8/ton) to settle at CNY8175/ton ($1063/ton without VAT).

Firmer futures trade continues to cushion higher spot prices in domestic market with fresh price lists from local producers indicate CNY50/ton ($8/ton) hike on PP and CNY50-100/ton ($8-15/ton) increased for PE cargoes. Trading activities, however, are kept to the minimum as players left their desks for Dragon Boat Festival. A trader in Linyi expressed his concern; “Continuous price increment in the past few sessions has sent a wave of resistance across buyer market. For that, we elected to offer discount to speed up sales. Outlook after the holidays remain unclear as futures trade is being stimulated partly by firmer energy values, yet several major local plants are due to resume production by second half of the month which might ease domestic supply.”

Indeed, Shenhua Ningxia Coal Industry Group and Ningxia Baofeng Energy Group Co is on schedule to restart their coal based PP units on 15 June and 25 June respectively, market sources reported. Both plants with combined PP capacity of 1.3 million tons/year are now at the center of buyer’s attention.

Import market remains mostly steady, however, a positive sign is that traders are holding back on forward selling activities on more optimistic expectation. Meanwhile, sellers offering Indian homo-PP to China are spotted to be more active today, with considerable number of cargoes at $900/ton CFR China, LC 30-60 days term.

A trader in Shanghai purchased Taiwanese HDPE film at $1120/ton, CFR China said, “Most of our suppliers are not giving offers, instead they are collecting bid for the available cargoes. We hope the market could sustain the stable trend in the near term as domestic producers are now free from sales pressure.”

In Southeast Asia, sentiment in the PP market pick up as a major Saudi Arabia producer announced fresh offers for homo-PP to Vietnam at $980/ton based on CIF, LC AS term. It is interesting that buyers actually accept to purchase the cargoes without any negotiation, marked another $20/ton increased from last week. A converter in the country bought 100 tons of material at the mentioned price level said, “At the moment, we already have sufficient inventories to cover production need till September, however we are considering to replenished additional cargoes for August-September arrival as we believed that prices might continue to advance in the coming weeks.”

Meanwhile, Indonesian buyers appear to be less aggressive in taking cargoes as players are trying to balance the stock level before the Ramadan holiday early July. With generally firmer international trend, domestic traders become less open to negotiation and holding very steady on their cargoes. A market source added, “Even offers for import Vietnamese homo-PP are now higher. We plan to secure some cargoes as it seems market has reached the bottom.”

Regional PE market meanwhile extended the stable to firm trend, though demand for HDPE and LDPE film grades is still on a weaker side compared to LLDPE film. Most suppliers have sold out June allocation and at the moment planning for July delivery cargoes. A Middle Eastern producer informed, “We maintain our offers for July delivery stable from last month with some slight discounts on deals, however, market respond is not very good for now. We have no plan to cut price significantly given lack of inventory pressure.”

Players reported receiving fresh HDPE offers from a major Thailand producer at $50-10/ton higher than last week to reach $1125/ton for film, injection and blow molding grade and $1130/ton for yarn grade, all based on CIF LC AS term. A buyer said, “We tried to bid for $20/t lower to purchase some quantity but our supplier refused to accept given lack of allocation. We plan to procure cargoes within these two week as we are not expecting any drastic reduction in the coming days.”

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