Asia Daily PP and PE Overview 27 Sept 2016

In China, futures prices on Dalian Commodity Exchange firmed up PP contract surged CNY102/ton ($15/ton) and LLDPE gained CNY35/ton ($5/ton) from the previous trading session. Both contract settled at CNY7171/ton ($919/tin without VAT) and CNY8635/ton ($1106/ton without VAT) respectively.

There is no official adjustment in domestic spot offers for both PP and PE, yet a good sign is that buyers continue to make purchases in preparation before the long National Day holidays. According to a private data, domestic PP and PE inventories at major producer’s warehouses have dropped about 57,000 tons in combined or 8.3% just on the first trading day of the week, and this trend might sustain throughout the first half of the week, players said.

A converter in Fujian said, “We still need some quantity of material and plan to complete all the purchases before Friday. It appears that domestic market might remain on the stable track for the remaining of the week, hence we would talk to our supplier tomorrow to procure some quantity of homo-PP yarn if can obtain small discount.” A trader added, “We concluded a good number of deal for domestic cargoes today and we do not see the need to commit to additional discount at the moment. We are trying to deplete our cargoes as market might turn quiet by end of the week.”

In the import market, there are deals reported for homo-PP cargoes, though discounts are necessary. Indeed, a trader sold 500 tons of South Africa homo-PP at $960/ton CFR China, LC As term, some $10-20/ton lower than initial offer, commented, “Competitive local cargoes are affecting badly the demand for import material. We hope to see better demand condition in the immediate term as a result of pre-holiday replenishment.”

In the PE market, a major Thailand producer down adjusted their offers to China market twice today due to strong buyers resistance toward the prices at upper end of the overall price range. Meanwhile, buyers appear to be attracted to prompt cargoes. A trader informed, “We sold approximate 1000 tons of Iranian HDPE material this week in both local and import market. Quarter 4 is rather bearish, yet we think market still hold an opportunity to firm up as buyers might need to purchase in preparation for Chinese New Year orders.”

In Southeast Asia, market sentiment remains heavy and buyers still refrain from making fresh purchases due to uncertain market outlooks. Regional players commented that if this condition persists, market might face further downward pressure in the coming week. In Vietnam, import homo-PP has breached below the $1000/ton threshold for the first time in nearly five weeks given stubborn sluggish buying interest. A trader offered on behalf on a Saudi Arabia producer informed, “We lowered our offers by $10/ton at $990/ton CIF Vietnam, LC AS term but only managed to close 200 tons deals. Most of our regular customers are not interested to replenish material claiming sufficient stock from previous purchases.”

Another buyers in the country purchased Chinese homo-PP yarn at $990/ton CIF Vietnam, LC AS term informed, “We only purchased 50 tons as near term outlook appears to be bearish, but we are running low on inventories. Demand in local market is very slow.”

Regional players are expressing their concern over the market prospects in the coming week. Many have pointed to a bearish outlook claiming the absence of Chinese buyers would pressure the supply side. “Most buyers are on wait and see mood at the moment and hoping for lower prices. We could not move much cargoes this week and the coming days would be slower,” a trader said.

The PE market is undifferentiated though most offers for LDPE film to the region remain on the high side. Other than that, even LLDPE film prices are softer despite availability remained tight. The overall import LLDPE film to the region is reported at $1180-1210/ton CIF Southeast Asia term. Meanwhile, LLDPE film offers in local Vietnam market is weakening, with locally held Middle Eastern cargoes shed VND100,000-300,000/ton ($5-14/ton) compared to yesterday. A trader sold Saudi Arabia LLDPE film at VND29,600,000/ton ($1205/ton without VAT) and Brazilian LLDPE film at VND29,400,000/ton ($1200/ton without VAT) said, “Demand is surprisingly weak at the time purchasing activities should pick up. We make no profit selling these cargoes. If this condition persist in the coming days, we fear market might be softened further. We plan to deplete more inventories within this week.”

In plant status news, Shell unexpectedly shutdown its Singapore naphtha cracker due to technical woes. It remains unclear on how long the cracker would remain offline, yet one of the ethylene buyers in the country informed that they have replenished sufficient feed to avoid production disruption. The cracker produces 960,000 tons/year of ethylene and 550,000 tons/year of propylene.