Asia Daily PP and PE Overview 26 Sept 2016

In China, futures prices on Dalian Commodity Exchange open the new week on mixed result. PP futures to be delivered in January inched down CNY11/ton ($2/ton) while same contract for LLDPE gained CNY25/ton ($4/ton). Both contract settled at CNY7066/ton ($907/ton without VAT) and CNY8590/ton ($1102/ton without VAT) respectively.

In domestic spot market, producers hold firm on PP and PE offers on the belief that buyers would need to purchase material before going off for the long National Day holidays. Indeed, players reported good number of deals concluded as a result of pre-holiday replenishment, yet most cargoes are domestic material. A converter informed, “We only replenish sufficient cargoes to cover production need in the next two weeks. Our end product business is still weak while we are having some previously purchased cargoes from international suppliers to arrive soon.” The source added that weakening local currency is making it more expensive to buy from the import market, while softened upstream costs could signal a less optimistic trend in the near term.

The successfully start up of Shenhua XinJiang’s new coal based plant is weighing on market sentiment, however, sellers refused to commit to large discount given the fact that converters are keeping low inventory on hand, and post-holiday purchases would be necessary.

Steady demand from the agriculture film sector is keeping the PE market on the firm track, yet prices at the upper end of the overall price range are facing stiff resistance. A trader in northern China informed, “Purchasing activities for LDPE film is still good on the back of limited availability. This has been in place for nearly two months and might go off soon on the restart of major domestic plants. We offered a small discount for CNY50/ton ($8/ton) on deal today.” Players are expecting that buyers would continue to make purchases throughout the first half of this week and market might turn quiet toward the second half of the week as buyers take off for the holidays.

In Southeast Asia, there are very limited trading on the first trading day of the week though several international suppliers have announced fresh prices at stable to softer levels compared to last week. Buyers are generally showing no urge in replenishing material despite suppliers’ willingness in negotiating. A Middle Eastern producer, who has been keeping their homo-PP offer at $1000/ton CIF Vietnam, LC AS term for the past one week, informed, “We have not been able to close any deal at the offered levels. Our customers appear to have replenished sufficient material hence not rush to make any purchases. Outlook is really bearish for us.”

Meanwhile, in Indonesia, buyers reported seeing very limited number of fresh offers from international suppliers, yet domestic traders are stepping up effort to stimulate trading activities by giving larger than usual discount. Locally held Southeast Asian homo-PP cargoes are being traded at as low as $1100-1110/ton FD Indonesia, excluding VAT term. Falling local prices are pressurizing import ground, and in fact, prices above the $1100/ton CIF Indonesia threshold are facing stiff buyers resistance, sources said. A seller offers Southeast Asian homo-PP yarn cargoes at $1115/ton FD Indonesia, without VAT added, “Sentiment is very cold. Demand for yarn grade remains subdued in spite of production issues in the country. We think international suppliers might have difficult time in achieving premium prices over other regional market as China and Vietnam seems weakening.”

Meanwhile, the PE market sees little movement and softening ethylene costs are pressurising the regional sentiment. While deals were reported lower last week, couple of sellers are still attempting to rollover their offers this week. In fact, a major Thailand producer reportedly maintained HDPE offers unchanged to both Indonesia and Vietnam claiming limited sales pressure as a result of lower production rate previously. Source close to the company informed, “Market is very quiet and initial respond is not so good. It supposed to be the high seasonal demand now, yet our customers show no interest in making fresh purchases. We are not very optimistic about the near term outlook.”