Asia Daily PP and PE Overview 24 June 2016

In China, futures prices on Dalian Commodity Exchange concluded the last trading day of the week on the firming trend, marking five consecutive winning sessions. Contract 1609 for PP added CNY126/ton ($19/ton) while LLDPE contract gain CNY45/ton ($5/ton). Both contracts settled at CNY7462/ton ($965/ton without VAT) and CNY8875/ton ($1148/ton without VAT) respectively.

Domestic spot offer for PP indicated another CNY50-100/ton ($8-16/ton) hike from yesterday while PE cargoes remain mostly unchanged from last session. Private data indicate another small drop of about 2% in domestic inventories at major producer’s warehouse, which sparks expectation of continuous price increment in the coming days. A trader in Linyi said, “Trading activities in local market is slowing down in spite of higher prices, party due to sufficient stock at converter side and also the uncertainties associate with Britain voted to leave EU. Near term outlook become ever cloudy, however, we do hope market to hold on to the firming trend with the support of low inventories pressure.”

In the import market, a major Indian producer lifted homo-PP prices to China by $50/ton from last month claiming lack of cargoes. Indeed, it is reported that the supplier only has allocation of 1000-1500 tons to offer to China this month with a source commented, “Buyers are a little reluctant, yet we think market might gradually accept the higher price levels because there is simply not enough material, especially when several new coal based projects are delaying start up.”

Shenhua XinJiang Coal-Based New Materials Project reportedly postponed the start up of its coal based polyolefins plant, which consist of a 450,000 tons/year PP unit and a 270,000 tons/year PE unit to mid of August. The complex was initially scheduled to come online in July 2016.

Import PE to the country also gains ground with offers below $1100/ton threshold for HDPE film technically disappear from the market toward the end of the week. Market is concerned about the state of supply from Middle Eastern producer with the Eid al-Fitr holidays is just around the corner.

In Southeast Asia, market ended the week on strong note despite hesitation built up among buyers after the British chose to leave Euro bloc. Vietnamese buyers have generally become more cautious with fresh purchases, waiting to have clearer picture on the possible impact of the adverse event in EU. A buyer received Saudi Arabia homo-PP injection at $1020/ton CIF Vietnam, LC AS term said, “Seller can apparently achieved better margins on yarn grades at the moment. For us, we prefer to withdraw from the market as the Brexit might have negative impact on the sentiment in the petrochemical industry. Anyway, we already have sufficient cargoes on hand now.”

An international trader commented, “Import offers from Middle East and India to the region continue to firm up with supply tightness plays the primary role at the background; yet we think this trend might be hurdled in the coming week as buyers might step out of the market to monitor further development. Meanwhile, buyers in Malaysia and Indonesia are also entering the holidays mood as Ramadan is around the corner.”

In the PE market, import LLDPE film continues to take lead among the common film grades, drawing support from the lack of availability. Most international suppliers are refusing to enter price negotiation in the absence of sales pressure with a market source said, “We initially received offers for Saudi Arabia LLDPE film at $1170/ton CIF, however our supplier later informed about out of cargoes due to unexpected plant issues. There are very limited number of offers for LLDPE film at the moment, hence we might need to accept other supplier’s offers at slight higher levels.”

For the fact that sellers are free from inventories pressure, many are expecting to see firmer trend after the Ramadan holidays in early July. A regional producer said, “Most domestic buyers in Indonesia only keep inventories for a month, which means they might need to replenish material after the holidays. We have sold out June allocation and we are planning for next month’s offering.”

Looking ahead, the uncertainties related to EU condition might hinder strong purchasing activities, yet industry players are not expecting any downtrend given the lack of sales pressure.  

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