Asia Daily PP and PE Overview 20 June 2016

In China, futures prices on Dalian Commodity Exchange opened the new week at the peak of the momentum as both contracts for PP and LLDPE skyrocketed. September delivery contract for PP settled CNY265/ton ($40/ton) higher at CNY7207/ton ($945/ton without VAT) while LLDPE jumped CNY250/ton ($38/ton) to reach 8780/ton ($1150/ton without VAT). However, it is important to note that both contract volumes have dropped 19% and 15% respectively from the previous session, drawing great market discussion about a possible strong speculation activity.

Domestic spot offers for both PP and PE continue to buoy, adding another CNY50-100/ton ($8-16/ton) from last week’s gain on the back of strong futures trade. There are reports from market sources saying couples of major local producers have withdrawn their price lists with expectation of achieving better margins in the coming days after seeing futures market rise steeply. A source showed his concern, “It looks like buyers have already restocked sufficiently and at the moment mostly are on the sideline monitoring market movement. This justification is based on a high number of inquiries we receive today but disappoint sales result.”    

Even import homo-PP from dutiable origins to China posted some $10-20/ton increased from last week to reach $940-990/ton CFR China, LC 0-90 days term, on an average. Sources reported that prices below $940/ton level is becoming scarce due to the lack of inventories pressure from the seller’s side. A trader received Omani homo-PP at $940/ton CFR China said, “We think this is just the start of the up trend thanks to supply tightness and strong support from futures trades. However, we see most domestic buyers are showing very small interest in import cargoes given weaker CNY and competitive local material.”

In the PE market, a major Thailand producer lifted HDPE prices to China by as much as $30/ton from late last month, reaching $1150/ton for HDPE film based on CFR China, LC AS term. Market respond at the first sight is not as good as expected, since buyers prefer to wait for other supplier to open new offers before making decision.

In Southeast Asia, the firm sentiment remains in place with a limited number of new offers emerged at higher level. There are more activities observed in Indonesia market as buyers are rushing for the final purchases before the road ban imposed on 27 June. Meanwhile, a major local producer decided to lift domestic offers by approximate $10/ton on all PP grades compared to last week on improved demand condition. A converter purchased local cargoes at $1170/ton FD Indonesia, cash term said, “Our supplier has withdrawn their offer soon after opened new prices claiming limited supply. We managed to secured some cargoes and we think that prices might continue to firm up in the coming days.” Indonesian players also reported receiving import homo-PP prices from a major Thailand producer at $20/ton higher than last week to reach $1160/ton for yarn and injection grades, based on CIF Indonesia, LC AS term.

In contrast, Vietnamese players are showing a relatively more cautious stance about the medium term outlook for PP after a week of aggressive purchases earlier this month. A market source commented, “Most of our regular suppliers have yet to announce new prices this week, yet we are looking at firmer price levels considering stronger sentiment in nearby China market.”

The regional PE market again portrays a very mixed movement with several producers announce new offers at diverged direction. A major Malaysian maker opened July shipment prices at $30/ton lower for LDPE film to Vietnam, at $1190/ton CIF, LC AS term. A buyer said, “We were really surprised with the move as other makers are showing intention to lift prices amid tight allocation. We are discussing with out supplier to purchase some cargoes with expectation that domestic demand would pick up by quarter 3.”

Meanwhile, Indonesian LLDPE film cargoes are offered at $10/ton higher to Vietnam market this week at $1180/ton CIF, LC AS term. Several deals for this origin have been reported at discount while others are still amid negotiation. Major Indonesian producer appears to be more aggressive in depleting cargoes ahead of the long holidays in early July by exporting to nearby markets. On top of that, another Indonesian maker informed CommoPlast they have sold out June allocation to domestic buyers, and now waiting to announce July prices. This has had local buyers in Indonesia concerned about the state of supply after the holidays. A buyer said, “However, demand for our end product normally weaken after Ramadan seasons, therefore, we prefer to be cautious.”

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