Asia Daily PP and PE Overview 22 June 2016

In China, futures prices on Dalian Commodity Exchange extended the firming trend with smaller hike. September delivery contract for PP gained CNY86/ton ($13/ton) to settle at CNY7365/ton ($957/ton without VAT) while LLDPE contract increased CNY96/ton ($15/ton) to reach CNY8855/ton ($1150/ton without VAT).

Physical spot offers for both PP and PE cargoes increased for two weeks in a row today by adding another CNY50-100/ton ($8-16/ton) from yesterday’s gain. Sellers are reportedly holding very firm stance on their cargoes, especially homo-PP yarn due to lack of availability from both domestic and international supplier; however, it appears buying interest in loosing steam as buyer resist higher price levels.  

The persistent tightness in homo-PP yarn supply has disappointed many players who were hoping to see increased allocation once domestic plants resume operation after shutdown. At the moment, it is expected that market might take longer to recover from production loses stemming from previous turnaround as China is embracing the second wave of plant overhaul starting July, CommoPlast has reported in a separate news. A trader expressed his view, “We think domestic PP supply might only improve by end of August, and for this, prices might sustain the current trend till then. Our concern is on the endurance of the futures market, which has been rallied recently. Buyers might loose confidence if Dalian Commodity Exchange turns weak.”    

In the import market, buyers started to accept higher priced HDPE yarn cargoes from near-by origins amid a series of unexpected plant issues in Iranian plants. A trader in Shanghai sold HDPE yarn at $1160/ton for Thailand origin and $1180/ton for Korean origin, all based on CFR China, LC 90 days term said, “We have not seen many LLDPE film cargoes from Thailand these days as the supplier is focusing on selling to India for better margins. Meanwhile, Middle Eastern cargoes are delaying due to the Ramadan seasons; hence, we think market has a strong grips on the firming trend in the near term.”

Import homo-PP to China has not witnessed any significant swing as strong futures trading and domestic ground are cushioning international offers. Players informed about the firm stance observed among suppliers in which prices between $960-970/ton CFR China are now given no room for negotiation upon deals.      

In Southeast Asia, the import market remains on the strong note though without high number of new offers from international suppliers. Regional buyers are in middle of negotiation for cargoes offered earlier this week. A source received Middle Eastern HDPE film at $1140/ton and LLDPE film at $1170-1180/ton CIF Vietnam, LC AS term reported, “We are placing bid for $30-40/ton lower from the offered level, yet our supplier refused to accept claiming limited allocation. This explained to why our supplier only open the new prices to selective customers while limiting discount to only $10/ton on HDPE film cargoes. This cargo will take two and a half months to arrive due to Ramadan holidays.”

It is expected that the stubborn tightness for LLDPE film supply might pro-long in the near term on the back of unresolved production issues. An Indonesian trader said, “Our Malaysian principal again unexpectedly shutdown their LLDPE line yesterday and it is unclear on the restart date. Local market might suffer from lack of availability since major domestic maker is paying more attention to export market recently. For this situation, we plan to increase offers in local market.”

Regional PP market is relatively quieter since major makers might only re-open offers again in the coming week. Yet, buyers are not looking any possibility of a downtrend in spite of the fact that Ramadan holidays are just around the corner. A regional buyer said, “We receive very few offers from international suppliers this week with some indication of higher price levels and reduced quantity. However, we do expected to see lower number of deal for the fact that most buyers already replenished sufficient cargoes earlier of the month.”

Regional players are monitoring the purchasing appetite and production status in the near-by China market to gauge the likely direction in quarter three before committing to any deep-seas cargoes. There is still high level of hesitation observed among buyers, yet wit the support from the other side of the market - supply, near term outlook remain bullish.

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