Asia Daily PP and PE Overview 16 June 2016

In China, futures prices on Dalian Commodity Exchange against the odd of falling energy prices to make an impressive rebound toward end of the week. Contract 1609 for PP leaped CNY1460/ton ($22/ton) to settle at CNY6919/ton ($899/ton without VAT) and LLDPE jumped CNY170/ton ($26/ton) to reach CNY8470/ton ($1100/ton without VAT).

Physical spot offers for both PP and PE parcels in domestic market remains largely stable to CNY50/ton ($8/ton) higher than yesterday. Firmer futures trade however, did not immediately lure cautious buyers back to the market albeit increased number of price inquiries traders received. A seller said, “Customers somehow do not show such strong urge to replenish cargoes as they were at the beginning of the week. We think the momentum might only revive if futures market continue to increase in the coming days.” The source added that most offers at the upper end of the overall price range are facing stiff resistance and obtained bids at well below initial price levels.

In the import market, distributors managed to conclude Indian homo-PP at $10/ton higher than yesterday at $930/ton CFR China, LC 90 days term. A market source based in Ningbo said, “Thanks to firmer domestic ground and active Southeast Asia market, our customers have accepted higher prices. Our Indian supplier might again focus on domestic market in the near term given tight supply and better margins from increasing domestic prices. Therefore, we are not seeing any factor that could create adverse effect on the current market trend.”

In the PE market, players are seeing very limited number on non-dutiable LLDPE film cargoes in line with some production issues reported in Thailand and Singapore recently. For this, market participants are not expecting any significant reduction in the near term even with slower trading activities at the background.

In Southeast Asia PP market, the general sentiment remains very firm, however buyers appears to be having dilemma whether to accept the current price levels amid lacking confidence in the medium term outlook. Suppliers, on the other hand continue to push prices higher to reflect the supply tightness condition. A Vietnamese buyer purchased 200 tons of Saudi Arabia homo-PP at $1000/ton CIF, LC AS term, a $20/ton lower than initial offer said, “We asked for additional quantity, however, our supplier couldn’t fulfil as they only have total of 400 tons allocation this week for the whole Vietnam market. We already have good inventories now, hence we might suspend our purchases if prices continue to increase.”

As more buyers are putting non-confidence votes to prices above $1000/ton threshold from dutiable origins, the main question the market face now is whether the PP bull has hit the peak. Commenting on this question, a regional trader said, “We think import offers for homo-PP might extent small range increases in the near term, however, this could generate reverse effect on the number of deal concluded.” Most are expecting more of a stable trend for the remaining of June.

There are very little changes in the regional PE market while buyers continue searching for LLDPE film cargoes with expectation of further price increase amid limited availability. A major Middle Eastern producer informed, “We have withdrawn our offers and planning for upward adjustment in the next opening. We are not experiencing any supply issues, just market sentiment seems supporting higher prices.”

Vietnamese buyers also received offers for Indonesian LLDPE film cargoes at $1170-1180/ton CIF Vietnam, LC AS term, which many market participants interpreted as a result of lethargic domestic demand ahead of Ramadan holidays. In fact, Indonesian players are reporting a calmer than usual market condition with converters portray a non-convincing stance of a possible strong rebound. A buyer said, “Our end product demand normally mute after the holidays while we are covered till August. For this, we prefer to stay on the side-line to monitor further development before committing to another purchases.”

In the Plant Status news, four major LDPE plants, evenly spread between Southeast Asia and Iran were forced to shutdown due to unexpected technical glitches in the past two weeks. One of these plants is likely to resume production next week. In addition to the lack of offers from major international sellers, players are now discussing about a possible tightness in LDPE supply within the region.

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