Asia Daily PP and PE Overview 15 July 2016

In China, futures prices on Dalian Commodity Exchange posted a mixed result after two consecutive losing sessions. Contract 1609 September delivery gained CNY44/ton ($7/ton) for PP to reach CNY8195/ton ($1049/ton without VAT). LLDPE future on the other hand inched down CNY20/ton ($3/ton) to settled at CNY9130/ton ($1168/ton without VAT).

The widespread bearish sentiment has had local producers to cut spot offers for PP by CNY50/ton ($7/ton) from yesterday while PE prices are down CNY50-100/ton ($7-15/ton). Traders are complaining about sluggish demand condition as buyers withdraw from the market in the lack of confidence in the near term outlook. A trader in Guangdong expressed his concern after purchased two containers of coal based PP from local suppliers, “Our regulars customers are very reluctant even in placing bids. We are taking a more cautious stance now as August outlook remains cloudy. Most plants supposed to shutdown due to G20 Summit are now actively requesting to operate at reduced rate instead of shutdown completely. Besides, Shenhua XinJiang Coal-Based New Materials Project is coming online this month end and would also ease the current tightness.”

There is very little movement observed in the import market, and import homo-PP to the country remain in the range $1020-1040/ton CFR China, LC 0-90 days term. However, prices at the lower end of the overall price range is becoming scarce as sellers are leveraging healthy demand condition in the nearby Southeast Asia market amid tight supply. It is reported that overseas suppliers have been able to conclude deals for HDPE cargoes after stepped back on their offer yesterday. A trader sold Taiwanese HDPE film at $1165-1170/ton CFR China, LC 90 days term said, “We have cut our offer $30/ton and managed to close some deals at the new prices. We think that market might not fluctuate in too large range in the near term since most sellers are not having sales pressure while strong LLDPE film market might provide some spillover effect.”   

In Southeast Asia, the general sentiment remains firm however trading activities appears to be quieter as players adopted a more conservative stance to monitor further development before taking position. Prices at the upper end of the overall price range continue to face stiff resistance from the market, and more suppliers decided to give larger than usual discount to encourage purchasing activities. A trader received offers for Middle Eastern homo-PP at $1110/ton, CIF Indonesia, LC AS term earlier this week said, “We concluded a small deal after obtain $40/ton discount. However, our supplier lifted their offers to $1130/ton with the same term right after that.” Market sources commented that this has given an impression of difficulties facing the suppliers in achieving their full price hike target.

Meanwhile, irregular homo-PP cargoes from the US are also showing up in Southeast Asia market, though at the price levels many regarded as unattractive for such long distance shipment. Regional players reported receiving offers for this origin at $1030-1050/ton CIF, LC AS term with a trader commented, “We think converters might be interested to buy if they can negotiate.” Players are expecting to see more of US cargoes to come in the near term as it is heard that current market situation in the US is rather discouraging.

In another news, India’s ONGC Petro Additions Limited (OPaL) has completed the trial run at its new PP plant and would start offering prime grade output to the market in the coming week. The company however, might only achieve more consistent operation rate in early Q4, in line with the start up of its dual feed cracker.   

The regional PE market continues to follow the firming trend with LLDPE film and LDPE film remain the lead factors lifting the whole market sentiment. Indeed, a major Middle Eastern producer reported, “We have been achieving better margins on LLDPE film sales in the past months, especially in Vietnam market. HDPE film might be a little lag behind at the moment, but we believed that demand shall advance in August as market enters the traditional peak season for HDPE applications.” The source also expects an improved supply condition toward end of the month as they ramp up production rate after the long holidays.

The long awaited re-start of Shell’s naphtha cracker in Singapore is now at the center of market attention, as players expecting some impacts on the upstream market if the company successfully brings the troubled cracker online. A regional buyer said, “We received more of HDPE offers this weeks, however we prefer to postpone our purchase to next week to have clearer view of the likely market direction once Shell return to operation.”

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