Asia Daily PP and PE Overview 18 Aug 2016

In China, futures prices regained its momentum after two consecutive session of losing. January delivery contract for PP jumped CNY118/ton ($18/ton) while LLDPE only posted a moderate gain of CNY65/ton ($10/ton). Both contract settled at CNY7510/ton ($968/ton without VAT) and CNY8950/ton ($1154/ton without VAT) respectively.

Domestic spot offers for both PP and PE remain mostly stable to CNY50/ton ($8/ton) firmer compared to yesterday. The number of deals concluded in both domestic and import markets are reported to be satisfactory. Most import homo-PP from Middle Eastern to the country has softened by $10-30/ton from yesterday as sellers stepped up effort to overcome buyer’s resistance. With the latest price cut, import homo-PP to the country is about $73/ton lower than local market, on an average, which could play an important role in steering buyer’s attention to the import ground.

A trader sold 1000 tons of Oman homo-PP injection and fibre at $960-970/ton CFR China, LC 90 days term said, “We managed to sell quite well at the new price levels, mostly to converters. We are not having any yarn cargoes at the moment. It appears that buyers are attracted to the offers at the lower end of the overall price range as local cargoes are now traded at much higher levels.”

In the PE sector, it is reported that most flexible packaging manufacturers are still operating at 50-60% capacity due to slow end product business. Meanwhile, agriculture film converters continue to make purchases in preparation for the high demand season, though most deals are still in small quantity. In a more interesting note, an international trader informed about preparing to welcome USA shale based HDPE cargoes in quarter 4. The source said, “Our headquarter is working on this matter and we heard the quantity might go up the few thousand tons. At the moment, import LDPE film is very tough business here as converters are having would prefer to source coal based cargoes to cut costs.”   

In Southeast Asia, trading activities is calmer toward the end of the week mostly due to lack of fresh offers from regular suppliers. However, buyers seems accepting the current prices after sellers committed to price cut amid stiff market resistance. Middle Eastern homo-PP cargoes at $970-990/ton CIF Vietnam, LC AS terms are mostly sold out at the moment. As reported yesterday, Saudi Arabia homo-PP sold at $990/ton CIF Vietnam, some $10/ton higher than the earlier trading session for the same origin; however, buyers reported today receiving confirmation from the supplier about allocation cut from the initial purchased quantity. Meanwhile, a major Indian maker has also matched the soft trend, cutting offers by $10-20/ton compared to last week to reach $990/ton CIF Vietnam, LC AS term. A distributor said, “Our customers are placing bid for $10-20/ton lower than initial offers and we are talking to our principal before deals can be formed. Buying interest is still in place, just that buyers are looking for a compatible price level with Saudi cargoes.”       

Indonesia buyers have returned to the market after the National Holidays, with official offers from major producers see no changes. It is reported that demand is yet to show any drastic upward movement; instead buyers are sourcing in small quantity hoping to achieve further reduction. A converter informed, “We have yet to see new development from the import market and we have purchased a small quantity now. We think domestic offers might continue to face downward pressure given the premium it carries over the import material. In contrast, import ground might really near to the floor.”

There are also very limited numbers of new offers observed in the PE market while players continue to negotiate on cargoes offered earlier this week. Many buyers maintain a firm expectation for September based on the recently energy and ethylene values. There has not been any sign of real improved demand in Indonesia this week; however, players in Thailand see some surprisingly pick up in purchasing activities after some discounts were given. A trader in the country informed, “Buyers just rushed back to replenish cargoes in preparation for the year end season. We sell a good quantity of material this week. Some of our customers have restocked till early November, and we feel optimistic about the near term outlook.”

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