Asia Daily PP and PE Overview 14 July 2016

In China, future prices on Dalian Commodity Exchange extended the weakening trend as both contracts for PP and LLDPE settled lower. September delivery contract for PP decreased CNY52/ton ($8/ton) to reach CNY8211/ton ($1049/ton without VAT) and LLDPE future slashed CNY75/ton ($11/ton) to reach CNY9190/ton ($1174/ton without VAT)

Domestic suppliers down adjusted spot offers by CNY50/ton ($7/ton) from yesterday for both PP and PE cargoes, in line with softer future trading. However, this has failed to revive buying appetite as buyers adopted a more conservative stance in diminishing confident levels in the near term outlook. A trader based in Hebei said, “Demand has slowed down visibly and even auction sales for coal based cargoes are disappointed. We are monitoring further development on the DCE closely to gauge the likely market direction in the near term. If future trades continue to move lower, market might embrace a brief period of price correction before a more solid support from the demand side could elevate market again in the coming month.”

Import homo-PP remains relatively stable with the emergence of several irregular cargoes. However, import HDPE film to the country is seeing some discounts, especially on offers at the upper end of the overall price range. A Thailand producer cut their offers by $10/ton compared to beginning of the week to reach $1165/ton CFR China, LC AS term with aim to entice buying interest. A trader commented, “We were initially expect a more positive respond from the buyer given limited availability in the market. However, it appears that more Middle Eastern cargoes are due to arrive market end of this month, in which buyers prefer to hold wait and see stance, hoping to see some discounts as supply condition improve. We therefore plan to focus selling cargoes as near term outlook is rather cloudy.”

The Southeast Asian market turns slower than expected with buyers become more cautious in their purchases, partially due to sufficient on-hand inventories. Sluggish trading activities have pushed several HDPE film suppliers, whose offers at the upper end of the overall price range to step back on their prices in bid to facilitate sales process. Indeed, a major Thailand maker reduced their HDPE film offers to Vietnam by $15/ton from earlier this week to reach $1185/ton CIF Vietnam, LC AS term. Source from the maker informed, “We are still receiving bids from customers at $30-35/ton lower, however we are not in the position to accept these prices. Buyers are very reluctant to make purchases, from which we feel a little not so comfortable.”

Discussing about a possible price correction for HDPE film, an international seller commented, “We think any price reduction at the moment might prove to be temporary as the peak seasonal demand for HDPE film in just around the corner. We believed this would support the market in the coming month.”

Buyers in the regional PP market are hesitating to enter new deals at the current prices, as many believed that market is lacking of fundamental support to move higher. A converter in Indonesia received offers for homo-PP from Vietnam and Singapore origins at $1160/ton CIF, LC AS term said, “We have sufficient inventories to cover production till September, hence we are in no rush to replenish material at the moment. We think that prices might be near to the peak as supply is gradually coming back. We prefer to wait until next month before make fresh buy.”

Indonesian players have based their expectation for an ease in homo-PP supply on the fact that PT Polytama Propindo has postponed their scheduled shutdown in August to further date, most expected to be early 2017. A trader in the country commented, “We think this would relax the current tightness to a certain extent in the immediate term, however, spot market customers might not benefit fully since most allocation are directed to contract market. We have adjusted our local offers down a little due to strengthening Rupiah, yet we hold optimistic expectation for the near to medium term prospect.”

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