Asia Daily PP and PE Overview 23 Sept 2016

In China, futures market is weak and contract 1701 for both PP and PE drop three digits on the last trading day of the week. January delivery contract for PP is down CNY106/ton ($16/ton) to settle at CNY7077/ton ($907/ton without VAT) while LLDPE contract slashed CNY100/ton ($15/ton) to reach CNY8585/ton ($1100/ton without VAT).

Domestic spot offers remain unchanged from the previous trading session though players reported weaker trading activities due to the psychological effect of falling futures trading. Sellers are not willing to give large discount as most have depleted a good quantity of inventories yesterday, releasing them from sales pressure. Indeed, private data showed a drop of 6.5% in total PP and PE inventories at major local producer warehouse on 22 September 2016 alone.

On the other hand, the successful start up of Shenhua XinJiang Coal-based New Materials Project sent shivers down the market. The plant is designed to produce 450,000 tons/year of coal-based PP and 270,000 tons/year of coal-based PE (LDPE). Source close to the company informed that the plant would continue to operate until 20 October 2016 and might stop for a month-long maintenance work.

There are little changes in the import market and homo-PP to China currently stand at $950-1030/ton CFR China, LC 0-90 days term. Meanwhile, HDPE remain under pressure and supply linger in the comfortable zone. Players reported receiving Singaporean metallocene PE at $50-70/ton reduction from last month, touching $1280-1320/ton CFR China, LC AS term. “We are considering this purchase as local demand is weak and outlook for the final quarter hold bearish.”

In Southeast Asia, market is really quiet on the last trading day of the week and there are very limited trading activities though several international suppliers just announced new offers for October shipment to the region. A Saudi Arabia offer homo-PP at $1000/ton CIF Vietnam, LC AS term informed, “No one called us to check out new offers and very limited respond from regular customers. Players seems have stocked up sufficient inventories, hence not interested in making fresh purchases. Market is strangely quiet.” Several other suppliers have tried to down adjust their offers near to the $1000/ton threshold; yet demand does not seem to get a boost. Players fear of additional reduction in the coming week if the current market condition persist, especially when propylene (C3) costs are showing signs of softening.   

Even in Indonesia, where homo-PP supply is generally tight, yet sellers are showing disappointment towards the state of demand. This tug of war is putting the near term prospect on the edge as woven bags manufacturers are seeing bearish end product businesses. Hope for better demand condition might depend heavily on the scheduled turnaround in the country that might tighten supply condition.    

The regional PE market posted slightly better condition as buyers are in the process of concluding deals after the fresh offers, though most transactions are with discount. A Malaysian producer initially opened LDPE film offers to Vietnam at $50/ton hike from last month, claiming limited supply ahead of annual turnaround. However, weaker than expected demand has had the maker cut down the hike target later. A buyer received final price for the cargoes at $1230/ton CIF Vietnam, LC AS term, “It is very difficult to make decision as prices are too high while demand prospect is little. We aware of the upcoming turnaround at the producer’s plant, yet we need to consider really carefully.”

Deals for import Middle Eastern LLDPE film to the region at below $1200/ton threshold are becoming more prevalent at the moment. A seller is trying to hold firm on their offers at $1200/ton CIF SEA, LC AS term informed, “This is very challenging. We prefer to monitor further movement before implementing any measure aim to entice buying interest.”

In another market, Indian players are also seeing comfortable supply for PE in local market while demand is not as strong as expected. Major local producer has put their PE offers under price protection scheme, which might put import offers under pressure.