Asia Daily PP and PE Overview 25 July 2016

In China, futures prices on Dalian Commodity Exchange slipped on the first trading day of the week as contract 1609 for September delivery settled at CNY8057/ton ($1029/ton without VAT) for PP, down CNY110/ton ($16/ton) compared to last week. Meanwhile, LLDPE futures slashed CNY165/ton ($25/ton) to reach CNY8865/ton ($1133/ton without VAT.)

Affected by weaker futures trading, local makers moved to cut LLDPE film spot offers by CNY50-100/ton ($8-15/ton) but maintaining prices for other PE grades. PP cargoes meanwhile inched down CNY50/ton ($8/ton) from last Friday. Players attributed such mediocre reduction in domestic market to the fact that most sellers have concluded July business and trying to hold their cargoes before announce fresh offers for August.

A trader in Beijing commented, “Such reduction on Dalian Commodity Exchange is not enough to create significant pressure on sellers at the moment. Our concern is that converters are still operating at reduced rate due to unfavorable weather condition and weak end production demand. If condition does not improve in the coming month, it might impact the current market prices.” In the PE sector, it is reported that converters in Northern China have started a new in-take of LLDPE film cargoes in preparation for agricultural film season. For this, LLDPE film is expected to remain firmer than other grades despite weakening ethylene costs.

In the import ground, dutiable homo-PP to China has breached below $1000/ton threshold for the first time in four weeks with the present of USA cargoes. Indeed, material from this origin fell approximate $30/ton from last week to reach $960-980/ton CFR China, LC 90 days term on the first trading day this week. A trader added, “Customers are showing tendency to purchase at this price level as it is more competitive than local cargoes now. Though this is very irregular material, we think the pressure on other origin could be significant, especially when market is expecting more of USA parcels to come in the near term amid weak local demand in that market.”  

In Southeast Asia, several producers announced fresh prices for August delivery at firmer levels compared to last month, however, there is a strong sense of weaker buying interest across the region, especially for import PP. A major Southeast Asian maker lifted homo-PP prices to regional buyers by $30/ton compared to last month to reach $1130/ton CIF SEA, LC AS term. A distributor reported, “Our principal is able to allocate extra quantity to us though the plant is still under maintenance shutdown. Market sentiment is a little sluggish and we prefer to take more cautious stance in the near term.”

Meanwhile, the arrival of previous purchased cargoes dampens buying appetite in Vietnam in recent weeks, though most cargoes have yet to reach the market due to port congestion in the Southern area. It might take up to two weeks before cargoes can be cleared, players said. A buyer received Singaporean homo-PP at $1070/ton CIF Vietnam, LC AS term commented, “We are not planning to make fresh replenishment at the moment as we think market is on the down-trend. Several others suppliers have indicated willingness to give discount on deals, and we expect local market to be softer in the near term.”

In contrast, domestic Indonesia market retains its firming trend on the first trading of the week after a major local producer reportedly lifted August contract prices by as much as 30%. This has given distribution market a strong support in lifting spot offers almost immediately. Indeed, buyers reported receiving local homo-PP prices at $20/ton increased from last week with a buyer said, “Domestic supply is relative tight at the moment, however we think market might be eased toward the end of August. For the coming days, we expect to see a more of stable to firm trend.”  

In the regional PE market, there is very limited number of new offers observed while LLDPE film supply from Middle East remains especially tight. Indeed, a major Saudi Arabia producer open August offer at $30-40/ton higher than last month for PE cargoes to reach $1240/ton for LLDPE film and $1190/ton for HDPE film, CIF SEA, LC AS term. A buyer said, “Our supplier informed that they have not enough allocation to supply any cargoes to us this month as a result of troubled plant previously. We might need to source material from other supplier if cargoes are available.” Industry player believed that supply tightness might continue to play an important role in keeping the LLDPE film market firm in the near term in spite of weaker ethylene costs.

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