Asia Daily PP and PE Overview 28 June 2016

In China, futures prices on Dalian Commodity Exchange surprised the market as it against the odd of falling energy market to add another drastic hike. Contract 1609 for September delivery jumped CNY405/ton ($61/ton) for PP to reach CNY8067/ton ($1037/ton without VAT) while LLDPE futures recoded CNY205/ton ($31/ton) increased to CNY9215/ton ($1184/ton without VAT).

Fresh spot offers from domestic makers indicated some CNY100-300/ton ($15-45/ton) higher for PP from yesterday as lack of homo-PP yarn availability couples with skyrocketed futures trades cushion the trend. Meanwhile, PE prices only gains CNY50-100/ton ($8-15/ton). It is reported that buying activities in local market is satisfactory, yet most cargoes takers are traders who are placing bet on continuous firming trend in the coming days. A Beijing based trader commented, “We see trading activities are improving as the depreciation of the Chinese Yuan encouraged buyers to turn to local market. Still, we are prefer to hold cautious stance now that the energy market has been consistently weakening since late last week.”

In the import market, homo-PP cargoes from dutiable origins are mostly traded above $1000/ton threshold, which players attributed to the firm support of strong futures trade and domestic ground. However, demand for imported cargoes appear to be lethargic given the availability of competitive domestic materials and weakening local currency, making it costlier to purchase cargoes in US dollar. A trader said, “Outlook for the second half of July is full of uncertainties. From our opinion, the only driver for the current firming trend is supply tightness; however, allocation from Middle Eastern producer might improve after the Eid al-Fitr holidays.” Import PE to the country has also gained ground, however, prices at the upper end of the overall price range are facing resistance from buyers.  

In Southeast Asia, market sentiment remains relatively healthy in spite of the upcoming Ramadan holidays in Malaysia and Indonesia, and growing concern over the potential impact of Brexit. Couple of international traders reportedly lifted their offers after achieve good sale results. A seller increased Saudi Arabia HDPE film prices by $10/ton from yesterday to reach $1120/ton CIF Vietnam, LC AS term said, “We have sold out all available cargoes for now yet many other customers are sending in purchase inquiries as they expect market might extend the firming trend with the support from increasing feedstocks costs.”

Meanwhile, a regional producer open fresh LDPE film offers with $30/ton increased compared to earlier this month at $1210/ton CIF SEA market. Source from the producer informed, “Initial respond from the market is not positive as buyers are showing certain level of resistance, however, we think players would gradually accept higher levels as overall supply is not sufficient.”

CommoPlast has contacted several regional converters active in exporting to European market to discuss about the near term outlook for end products demand. Mounting macroeconomic uncertainties after the Britain decided to quite European Union worries many manufacturers; yet there have not been any changes from the end users side. A HDPE bag maker said, “We at the meantime prefer to replenish material in small quantity, waiting to see further development. Our customers might request to lower end product prices considering the recent appreciation of the US dollars.”

In the PP market, supply tightness persists throughout the region, though there are some fragments showing demand for deep-seas cargoes might be reaching the stagnant stage. A trader received South Africa homo-PP offers at $1010/ton CIF Vietnam, LC AS term said, “Our supplier was willing to give some discount on deal, yet we decided to stop purchasing any cargoes above $1000/ton threshold, which many other traders do. We are not very confident about the near term outlook as prices are increasing too quickly without fundamental support from the demand side. Most cargoes shall be arriving in August, which might signal a more comfortable supply condition in local market in Q3.”

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