Asia Daily PP and PE Overview 05 August 2016

In China, futures prices on Dalian Commodity Exchange fetched higher prices on the last trading day this week after several falling sessions. Contract 1609 for LLDPE increased most visibly at CNY125/ton ($19/ton) to settle at CNY9155/ton ($1177/ton without VAT). PP futures inched up CNY51/ton ($8/ton) from the previous day to reach CNY8320/ton ($1069/ton without VAT)

Domestic producers decided to lift homo-PP spot prices to eastern China area by CNY100-150/ton ($15-23/ton) compared to yesterday despite strong buyer resistance. Thanks to firmer LLDPE futures, local PE market added some CNY50-100/ton ($8-15/ton). However, trading activities have been slow and buyers are negotiating to conclude deal at last week’s levels claiming negative margins at current market prices. A Ningxia based trader reported, “Our sales today is really disappointed, that is even with the stable prices we maintained on the firmer trend at the background. Our manufacturing customers in the PP sector are still holding comfortable stocks, which were previously purchased at CNY500-700/ton ($75-105/ton) lower than the current offer levels. This is why we received very low bids this week. Market is so volatile these days and spot prices are heavily influenced by the futures trading, hence we feel it is very difficult to gauge the outlook in the second half of this month. We prefer to hold conservative stance till demand condition improve.”

Import homo-PP to the country mostly unchanged from the previous trading session. Meanwhile, several deals for Iranian HDPE film are reported at $1110-1150/ton CFR China, LC 0-90 days term. It is interesting that the same cargoes concluded in the nearby Vietnam market at $10-15/ton lower than in China for similar quantity. A trader sold the cargoes commented, “Our Iranian supplier is currently collecting bid for their HDPE yarn cargoes due to persistent weak buying interest. We managed to sell some cargoes at very thin margins and we might continue to deplete our inventories amid uncertain market outlook.”

In Southeast Asia, market sentiment remains relatively stable on the last trading day of the week, however, it is reported that purchasing activities for import homo-PP show some improvements. An international trader sold Saudi Arabia homo-PP cargoes to Vietnam at $1010/ton CIF, LC AS term said, “This week we manage to conclude more than 1000 metric tons in Vietnam market, though buyers only take small quantity. We heard other suppliers also achieve good sales at the same price level. Despite a blip in demand, we could not lift our offers as buyers are resisting any offers above this levels. We hope market could sustain a stable trend in the coming week.” Indeed, import prices at the upper end of the overall price range are catching very little buying attention, which forced producers to lower their offers. Indian major is among these suppliers, who cut homo-PP prices by $20/ton from last week to $1035/ton CIF Vietnam LC AS term.

Meanwhile, Indonesian converters reported receiving some $30/ton reduction on local homo-PP yarn cargoes from traders today, which surprised many players in the country considering the lack of availability. A converter explained, “Even with the reduction, the gap between local and import prices remain substantially. We have purchased some non-dutiable cargoes from import market, hence we decided not to proceed with domestic cargoes.”

Market is now questioning whether the current downward movement observed in the PP market would prolong in the near term. Discussion is on going though players are divided on their opinions regarding the issue. Many prefer to closely monitor development in China market to gauge the likely direction in Southeast Asia.

There are not many new movement in the regional PE market with LLDPE film offers remain limited while industry participants reported seeing additional offers for HDPE cargoes just when the trading week about to end. It is worth noting that among markets in the region, Indonesia appears to have more comfortable LLDPE film supply than others, which arouse players’ expectation of seeing more Indonesian cargoes moving to nearby markets in the coming days.

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