Asia Daily PP and PE Overview 12 July 2016

In China, futures prices on Dalian Commodity Exchange rebounded from a depressing trading session last Friday as September delivery contracts firmed up visibly on the second trading day of the week. PP futures settled CNY224/ton ($33/ton) higher at CNY8300/ton ($1060/ton without VAT) while LLDPE futures jumped CNY260/ton ($39/ton) to reach CNY9315/ton ($1190/ton without VAT).

Domestic spot offers for both PP and PE weaken for the second days in a row as local producers slashed prices by CNY50-100/ton ($8-15/ton) from yesterday on sluggish buying interest. A Beijing based trader commented, “The number of deal concluded is very disappointed despite lower prices. We feel relief that future market rebound, which is expected to have some positive impact on the spot market in the coming days.”

Most converters are reported to hold minimal stock at the moment given slow end product business and uncertain near term market outlook. Data show that local inventories from major producers have swollen by almost 17% compared to last Friday to reach approximate 774,000 tons as of today. However, this is still well below the red lines, which usually signal mounting sales pressure among suppliers.

In the import market, a Thailand producer lifted PE offers by $10/ton for HDPE film and $30/ton for LDPE film from last week on the back of limited availability. A trader received the offer said, “Most of our regular Middle Eastern suppliers are not having cargoes recently, and hence, this might create an opportunity for Southeast Asian makers to achieve higher price target.” Import homo-PP meanwhile, started to portray some signs of stabilising, as prices have not changed since last week.  

In Southeast Asia, market sentiment remains very strong with several producer announced fresh offers at higher levels compared to last week, especially for PE grades. Indeed, a major Thailand maker implemented another $15/ton hike on their HDPE cargoes to Vietnam this week to reach $1200/ton for HDPE film, injection and blow moulding, and at $1205/ton for HDPE yarn grade, all based on CIF Vietnam, LC AS term. Source from the producer informed, “We face some initial resistance from buyers; however, we manage to conclude some deals after agreed to $5/ton discounts. Our regular customers are very hesitant in making large purchases though it seems there is still some room for prices to move higher in the near term.”

In regional local market, a major PE producer in Indonesia decided to lift LLDPE film prices by approximate $15/ton compared to the pre-holiday levels in spite of slow demand as buyers have yet to return to their desks completely. A HDPE bag converter in the country said, “Post holidays demand for our end products is better than expected; however, we have replenished sufficient material to cover our needs in the next couple of months, hence we are in no rush to make additional purchases though prices are firming up.”

LLDPE film supply is further tightened in domestic Vietnam market due to the late arrival of previous purchased cargoes, which allows locally held LLDPE film cargoes to trade at premium over other PE film grades.

The regional PP market is relatively calmer than the PE sector as most suppliers have yet to announce new prices. However, buyers are very much holding the wait and see stance amid diminishing confidence in the medium term outlook. Offers at the upper end of the overall price range are facing stiff market resistance with a source reported, “We received offers for Middle Eastern homo-PP at $1110/ton CIF Indonesia, LC AS term, and we think this price is a little too high to accept though our supplier is not having quantity. We expect the current tightness to be eased once plants resume production after maintenance. Trading activities are indeed very thin since most players in Malaysia and Indonesia are not fully back from the holidays last week.”