Asia Daily PP and PE Overview 27 May 2016

In China, futures prices on Dalian Commodity Exchange continue to journey south after three consecutive winning sessions as traders become less optimistic about the near term outlook. Contract 1609 for PP inched down slightly CNY9/ton ($1/ton) to reach CNY6411/ton ($835/ton without VAT) while LLDPE futures slashed CNY180/ton ($27/ton) at CNY7880/ton ($1027/ton without VAT).

Domestic spot offers for PP opened at CNY50/ton ($8/ton) higher than yesterday with traders claim to have minimal sales pressure amid limited availability. In contrast, PE offers lose CNY50/ton ($8/ton) due to comfortable supply and weaker demand. A trader from Zhejiang claimed to have sold a good quantity of homo-PP yarn in domestic market today said, “Basic demand for PP in local market still exist; however buyers are just purchasing hand to mouth basis. Compared to PE, we are satisfied with PP trading activities these few days.”

Players attributed a pick up in trading activities due to a series shutdown in domestic market this week, arousing the concern about the supply condition in the near to medium term. Indeed, three propylene plants with total capacity of 1.44 million tons encounter technical issues this week and forced to take emergency shutdown. At the meantime, three PP plants also go off-stream this week with total capacity at 720,000 tons/year.

There is little movement in the import market, particularly for homo-PP cargoes. Traders refused to cut prices below $900/ton threshold for dutiable origins in spite of sluggish buying interest with the support from supply tightness. A buyer from Shanghai said, “Sellers have been maintaining such firm stance for over a week now, however, we are seeing an increasing number of Middle Eastern parcels arrive Shanghai port recently. Most buyers are placing bid at below $900/ton levels, therefore we think it is difficult to achieve deals without some discounts. We are looking to replenish some cargoes, therefore we are monitoring the market very closely to have an insight into the reasonable price level.” Traders also expressed little interest in re-export PE cargoes to Southeast Asia market given tiny price gap between two markets. Falling monomers prices has also encouraged traders to take caution in giving offers to the market.

In Southeast Asia, market turn quiet on the last trading day of the week as both buyers and sellers take more conservative stance to monitor further movement before planning for the next move. Couples of major Middle Eastern producers have withdrawn their homo-PP offers to Vietnam claiming out of allocation, in which many believed that market is heading for a stable trend in the near term. A converter purchased Saudi Arabia homo-PP at $950/ton, CIF LC AS term said, “Other suppliers informed they have no more quantity at the moment, therefore we believed the weakening trend might slow down in the near term. We are monitoring the upstream costs and buying appetite in the regional markets before taking position.”

In Indonesia, buying interest in general appears to be better than others, however, buyers are very cautious in negotiating for deals, especially import cargoes. A converter received Vietnamese homo-PP offer at $1060/ton CIF Indonesia, LC AS term commented, “Supply in domestic is still tight and this condition might prolong with the shutdown at Polytama plant end of July. Demand for our end product is stable; therefore we plan to negotiate to buy some import cargoes. We think the sentiment is having some support from the energy market and prices might have very small room to move lower in the near term.”

The PE market sees more activities, however deals are concluded at larger than usual discounts. Indonesian buyer purchased Middle Eastern HDPE film and LLDPE film cargoes after obtain $60/ton discount from initial offers said, “Market behavior has changed and it is really difficult to justify the deal level. Demand for PE in domestic market is weaker than other grades, hence local traders are willing to give discount to encourage purchasing activities.”

Meanwhile, supply for LLDPE film remain tight with Saudi’s PetroRabigh delay restart at its LLDPE plant until mid June after an unexpected outage last week. Chinese distributors also reported thunder strikes at a cracker’s panel belong to PTT Thailand, which forced the company to take one of the crackers off-stream since last week. Market sources added that PTT is planning to shut its 400,000 tons/year LLDPE unit from 1 June to 7 June due to lack of ethylene supply.