Asia Daily PP and PE Overview 30 June 2016

In China, futures market extended the mix trend recorded in the earlier trading day with LLDPE futures fall for second straight session on perceived improved local supply condition. Contract 1609 for LLDPE slashed CNY80/ton ($12/ton) down to CNY8915/ton (1148/ton without VAT) while PP contract added CNY145/ton ($22/ton) to settle at CNY8051/ton ($1036/ton without VAT).

Domestic spot market received additional CNY100-200/ton ($15-30/ton) hike on PP cargoes from domestic producers on the latest price lists. It is interesting that spot PE market has yet to see the impact of falling futures trades as today’s offers indicate another CNY50-100/ton ($8-15/ton) increased from yesterday. Players attributed this to the lack of inventory pressure on the seller’s side during the month end period.

Player reported seeing healthy demand for homo-PP yarn as traders continue to replenish cargoes to maintain stock levels, especially those active in both spot and futures markets. For this reason, a trader from Linyi expressed his concern; “It is not real demand from downstream converter but the futures market that absorbs local supply recently. This is why we think there is a high risk of a price correction in the near term. We are now restraining from taking large cargoes to avoid price risk. Sales for LLDPE film in domestic have been poor this week.”

In the plant status news, Datang Duolun Coal Chemical Corporation is forced to delay the restart of its 460,000 ton/year coal-based PP unit to end of July due to environmental issue. The plant was initially plan to come back from a 45 days maintenance shutdown my mid-June 2016.

In the import market, there are several offers for irregular USA homo-PP cargoes at as low as $930/ton CFR China, mid-August shipment. A buyer received the offers commented, “The cargoes would only arrived by October, that is a little too far from the current date, hence we might not proceed further.”

In Southeast Asia, trading activities are limited as most players in Malaysia and Indonesia are off for the Ramadan holidays while sentiment in other markets within the region remain relatively strong. Indonesian LLDPE film cargoes re-emerged in Vietnam market at $10-25/ton higher than beginning of the month to reach $1200-1205/ton CIF, LC AS term. A trader offering the cargoes said, “Supply for LLDPE film remain tight and some of our customers are placing bid at $10-15/ton lower to buy in large quantity. We are considering the deal now, however we think the PE market might continue to move higher with the support from firm upstream costs and limited availability.”

Another converter in Malaysia received Canada LLDPE film cargoes at $1170/ton CIF, LC AS term said, “We did not precede with the purchase since it takes the shipment two months to arrive while we are searching for near-by cargoes. Demand for our end products is weak, hence we prefer to remain cautious about fresh replenishment.”

The regional PP market is rather quiet as most international suppliers have yet to announce new prices. Buyers, however, are holding a certain degree of cautious stance with reduced confidence level in the medium term outlook. A regional buyer said, “Our regular Middle Eastern producer has yet to announce new offers, yet, initial expectation is that prices might be stable as buyers are resisting the upper end of the overall price range. It is really difficult to gauge the medium term outlook for PP, hence we prefer to monitor closely new development in the nearby China market and avoid committing to large purchases.”

In Indonesia, rice sack manufacturers are in the process of tendering for government projects, which is expected to keep demand for homo-PP stable in the coming months. Yet, converters are still reluctant in keeping too lengthy inventories. A buyer said, “Our production is covered till end of August now, but we have no confidence in stocking up for another month. We might monitor further development after the holidays before taking position.” Meanwhile, other traders are placing bet on a more optimistic note citing the current firming trend is there to stay as long as the scheduled turnaround take place as per planned.

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