Asia Daily PP and PE Overview 23 June 2016

In China, futures prices on Dalian Commodity Exchange continue to gain momentum with September delivery contracts increased from earlier trading session. Contract 1609 for PP inched up CNY51/ton ($8/ton) to settle at CNY7355/ton ($955/ton without VAT) while LLDPE contract added another CNY70/ton ($11/ton) to reach CNY8835/ton ($1148/ton without VAT).

The firming trend, which persists in the domestic market for the past two weeks appears to be slowing down as fresh PP and PE price lists from domestic makers show only CNY50/ton ($8/ton) hike from yesterday. Tight availability for homo-PP yarn continues to support sentiment while demand in Eastern China remains healthy. Traders in other areas, in contrast are seeing weaker buying interest as converters refrain from making additional purchases amid slow end product demand. A converter in Fujian said, “We are buying hand to mouth from domestic market at the moment as our end product demand is really sluggish. We are not expecting sellers to give large discount as their inventories on hand is low.”

In the import market, homo-PP from dutiable origin is widely accepted by buyers at the level $980-990/ton CFR China, LC 0-90 days term. A trader sold Indian homo-PP at the same price level said, “We think mainstream cargoes might hit above $1000/ton threshold in the coming days and buyers shall gradually accept the market situation. Customers from woven bags sector are still having stable end product business, yet they prefer to source material domestically to leverage the exchange rate.”

In the PE market, demand for HDPE film is showing some signs of improvement as lacking of Iranian cargoes stemming from production issues in this country is encouraging buyers to secure cargoes from the near-by suppliers.    

In Southeast Asia, market is more active as the week proceed with additional new offers from international suppliers. Indeed, a major Saudi Arabia producer opens fresh July delivery offers for PE at $20/ton hike for LLDPE film and $30/ton higher for HDPE film to reach $1190/ton and $1160/ton respectively, based on CIF SEA, LC AS term. Source from the producer informed, “We are experiencing some undesirable technical issues at our cracker, which resulted in lower production rate at the downstream PE units. We are having very limited allocation this round, hence we are not planning to give discount on deals. Even for HDPE film, we expect the demand to return in the near term in line with the peak season for HDPE film applications.”

In the regional domestic markets, it is interesting to see stronger purchasing appetite among Indonesian buyers in which most suppliers claimed to have sold out June allocation for now. A major domestic maker said, “We have also sold out our PE cargoes and currently looking at firmer trend for July in spite of the long holidays.” In the distribution market, several traders in the country have already up adjusted their offers in the absence of sales pressure.

Sentiment in the regional PP market remains strong, with deals are reported at higher levels than last week. Trading activities in local Indonesia shows visible pick up, from which traders decided to increase their offers by approximate $20-30/ton compared to earlier this week. A market source said, “We received good number of inquiries from local buyers these two days while we have sold out most of our available allocation for June. We think this trend might sustain throughout the holidays given tight availability in both local and international markets.”

Meanwhile, Vietnamese buyers have accepted Saudi Arabia homo-PP cargoes at $1010/ton CIF, LC AS term, $10/ton higher than last week. Some suppliers were offering at the similar levels reportedly withdrew their offers after receiving good respond from the market. Players are now gauging on how far the current firming trend would go without the support of real demand from the converter side. A trader commenting on this matter said, “It is really difficult to anticipate the market at the moment given the presence of numerous factors that could possibly affect the trend. However, looking ahead, we think the current firming trend would sustain in the near to medium term.”

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