Asia Daily PP and PE Overview 14 Sept 2016

In China, futures prices on Dalian Commodity Exchange has shown some signs of stabilizing on the last trading day before market depart for mid-Autumn Festival holidays. PP futures prices inched up CNY5/ton ($1/ton) while LLDPE futures loses the same amount. Both contracts settled at CNY7118/ton ($912/ton without VAT) and CNY8750/ton ($1121/ton without VAT) respectively.

Domestic spot offers for PP fell for the fifth straight session today, accumulating a total reduction of CNY300-350/ton ($45-52/ton) while PE offers also witness CNY50-100/ton ($8-15/ton) decreased as a result of weakened futures trade. It is reported that trading activities are very slow today since most market players embrace the holiday mood. A converter active in homo-PP yarn area informed, “We have purchased two containers of homo-PP at a slight discount, which is sufficient to cover our production needs for a week. We might wait till next week before making another replenishment. We think if demand condition does not improve after the holidays, there are chances that suppliers might reduce prices further to attract buying interest.” This is especially when two new coal based PP plants with total capacity up to 1.15 million tons/year are starting up end of this month.

Continuous falling local prices are putting pressure on import ground, in which several traders have decided to down adjusted their offers for dutiable homo-PP cargoes to attract buying interest. A trader cut Saudi Arabia homo-PP injection price by $10/ton reaching $950/ton CFR China, LC AS term said, “We only left a small quantity, yet we achieve no deal today due to weak demand for homo-PP injection. Import market might face further pressure if local suppliers continue to cut offers after the holiday.”

Compared to PP market, LDPE film sector is firm with the support of limited supply, stemming from couple of major shutdowns in the country. However, further price increment might face stiff resistance as domestic offers have reached CNY10150-10500/ton ($‎1300-1345/ton without VAT). A trader informed, “Our small to medium size customers have yet to ramp up operation rate and we hope they would after the festival. LLDPE film sales are dropping due to weak futures market and also improving supply condition. We expect a more of stable trend in the coming days.”

The Southeast Asian PP market sees more activities in Vietnam after a major Saudi Arabia producer implemented $10/ton hike on their cargoes compared to the earlier trading day while pointing to a possible offers disruption in the next two to three weeks without elaborating further detail. Latest prices stand at $1035/ton for yarn and injection grades, CIF Vietnam, LC AS term. It is heard that the supplier managed to sell off approximate 3,000 tons after stepped back of their hike target. A trader purchased 200 tons of material at $1010/ton informed, “We think the PP market might hold firm in the near term given strong upstream costs. However, local demand is very sluggish which prevent domestic trader to lift their offers. We hope to see better demand condition in the coming week as Chinese buyers might need to replenish material before the National Day holidays.”

Meanwhile, Malaysian traders are reporting to have received a better number of purchase enquiries today as buyers are stocking up before the annual turnaround at one of the major local producer’s plant. A trader reported, “Weaker local currency might also play an important role in keeping local prices stable to firm in the near term. We hope demand would continue to pick up in the coming day.”

There are very limited numbers of new offers observed in the PE market today, especially for LLDPE film cargoes. However, Southeast Asian LDPE film suppliers are attempting to increase their offers amid the general tight supply condition. A major Thailand maker lifted LDPE film offers to Vietnam by $20/ton from last week to reach $1225/ton CIF Vietnam, LC AS term, marking the second consecutive week of price increment. However, market respond appears to be disappointed. A buyer received the offers commented, “The supplier is not having high sales pressure due to the recent shutdown at their plant. However, demand in local market is very weak at the moment and buyers are not willing to accept higher prices.”