Asia Daily PP and PE Overview 13 June 2016

In China, futures trading on Dalian Commodity Exchange advanced further on the first trading day of the week with contract 1609 for PP added CNY85/ton ($13/ton) while LLDPE contract jumped CNY145/ton ($22/ton). Both contracts settled at CNY6930/ton ($899/ton without VAT) and CNY8340/ton ($1082/ton without VAT) respectively.

Physical spot offers for both PP and PE in domestic market witness CNY50-100/ton ($8-15/ton) increased on the back of escalating futures trading. A good news is that buyers return from the Dragon Boat Festival with more buying appetite, sources said. Indeed, traders are reporting good number of deals in local market, which allows domestic producers to deplete approximate 50,000 tons of inventories on a single trading day of Sunday, private data showed.

A trader commented, ““It appears that the market is gaining solid support from several factors including low inventories pressure, currency exchange rate and also strong futures trade. This encouraged manufacturers to take slightly more than basic need to avoid production disruption. Our concern is the sustainability of the firming trend in futures trading which psychologically lifting spot market in the past two weeks.

In the import market, limited quantity of homo-PP cargoes from dutiable origins are offered at $20-30/ton higher than last week with prices below $900/ton threshold are technically disappeared from the market. A trader received offers for Middle Eastern homo-PP at $930/ton CFR China complained about his inability in obtaining Indian cargoes in the face of lacking availability. The source commented, “Domestic demand pick up earlier than expected with strong futures trade at the background have pushed up import prices. Compared to earlier this month, prices have increased approximate $60-70/ton, which left us very little room to export or re-export any cargoes to Southeast Asia.”

Not only import homo-PP firmed up, even some regular HDPE film cargoes are also inched higher with a Shanghai trader said, “Our Middle Eastern suppliers lifted HDPE film prices $20/ton compared to last week without offering other grades. We are now monitoring market response toward the new levels, as we believed that significant price increment would drive buyers back to local market to take advantage of the recent currency depreciation.”

In Southeast Asia, market sentiment remains on the stable to firm trend with very limited number of new offers observed on the first trading day of the week. However, players are mostly looking at the possibility of continuous price increment in the near term, especially for homo-PP, with the support from firm every values and tight supply. A Vietnamese buyer received Chinese homo-PP at $1010/ton CIF Vietnam, LC AS term said, “Other Middle Eastern suppliers have yet to announce new prices, yet we are expecting at least $20/ton higher than last week. Demand in local market is picking up as we received good number of purchase enquiries today.” Indeed, domestic homo-PP prices in Vietnam continue to gain VND200,000/ton ($9/ton) at the beginning of the week, in line with the firming trend in the international ground.

Meanwhile, a major domestic producer in Indonesia opens fresh offers to local buyers at stable levels from previous price list. A market source commented, “Demand for homo-PP in domestic market is relatively healthy and we managed to conclude a satisfactory number of deals in the past week. We hope this trend could sustain in the coming days though domestic demand might diminish toward end of June with the approaching Ramadan holidays.”

The regional PE market has yet to be active, especially when there is limited number of offers given out to buyers. Players are generally waiting for July shipment prices with expectation to see the stable to firm trend in place. A regional converter said, “We think LLDPE film cargoes concluded at the lower end of the overall range last month might rise to reflect the supply tightness condition. However, we remain conservative about HDPE outlook as comfortable supply might downplay any seller’s effort to lift their offers.”

In the regional local market, domestic Indonesia opens the week with $20-30/ton reduction while buyers in Malaysia are not confident in replenishing material ahead of the long Ramadan holidays early July 2016. Converters in these countries are not convinced about the rebound trend amid weakening buying interest; hence most buyers are taking very cautious stance when it comes to fresh purchases. In contrast, Vietnam market extends the firming trend, as local traders are not holding high inventories, especially for LLDPE film. Converters are sending in more inquiries for cargoes, which trigger speculation that domestic market might face serious LLDPE film shortage in the next couple of week if previous cargoes do not arrive on time.

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