Asia Daily PP and PE Overview 10 Oct 2016

In China, futures prices on Dalian Commodity Exchange recorded an impressive hike on the first trading day after a long National Day break. PP contract jumped CNY279/ton ($42/ton) while LLDPE contract surged CNY405/ton ($61/ton). Both contracts settled at CNY7578/ton ($970/ton without VAT) and CNY9170/ton ($1173/ton without VAT) respectively.

In domestic market, since players resumed working on last Saturday, domestic PP and PE prices have increased approximate CNY300/ton ($45/ton), yet trading activities are reported to be healthy. As discussed earlier, buyers are stocking up in anticipation that stronger energy market would boost sentiment, encouraging sellers to hike their offers in the coming days. This has resulted in a reduction of domestic inventories at major producer’s warehouse by approximate 18% or 140,000 tons over the past two days, private data showed.

A trader in Xiamen informed, “We managed to sell very well in the past two days and we still receiving very good number of purchase inquiries today. Sentiment is firm thanks to the futures market and low inventories pressure from local producers. We think this condition might sustain throughout this week.”

In the import market, homo-PP yarn and injection from dutiable origins to China increased $20-30/ton at the lower end of the overall price range compared to the pre-holiday period, and prices below the $970/ton mark have not repeated at the start of the week. A trader offers Saudi Arabia and Indian homo-PP cargoes at $990-1000/ton CFR China, LC AS term commented, “Buying interest for import cargoes is still lag behind the domestic’s. We think market might continue to extent gain this week, we re just concern about the coming weeks, once buyers have stocked up sufficiently.”

In the PE market, LDPE film supply remains tight as the restart of major local producer has yet to comfort the condition. Meanwhile, many converters are still complaining about slow end product demand. A PE film maker in Ningxia commented, “We have purchased 500 tons of LLDPE film before the holidays and additional quantity over the weekend which is sufficient for our production in the next 20 days. We might procure more quantity if necessary, otherwise we prefer to consume on hand stock first since demand for our end product is still weak. We think suppliers might try to be firm on their cargoes in the coming days given the lack of sales pressure and the support from the energy market.”    

News on healthy post-holiday demand in the nearby China market excite many players in Southeast Asia market, yet little movement in term of prices reported in the region. There are very limited numbers of new offers reported at mostly stable levels. Indeed, a major Thailand producer opens weekly prices to Indonesia with only $10/ton reduction for PP block copolymers while maintaining homo-PP and HDPE prices unchanged. An Indonesian player commented, “Market sentiment here is still calm and there is no major movement observed at he beginning of the week. However, we think the demand is there, just that buyers are asking for lower prices.”

Meanwhile in Vietnam, domestic traders are attempting to increase prices for both PP and PE cargoes in line with strong energy values and firming international ground. Demand from converter, however, remain disappointed though hope for improvement is rather strong. A trader reportedly lifted offers for all PP and PE cargoes to local buyers by VND200,000/ton ($9/ton) compared to last week said, “Domestic traders are very active is asking for offers, yet buy ideas and bids are low. We believed that buyers would eventually accept the new levels considering the demand condition in the nearby China market.”

Another trader added, “We are trying to implement some small hike to recoup the high cost cargoes purchased previously, however, it seems difficult. We hope China market remains resilient in the near term, which in turn can support the general sentiment in Southeast Asia market.”

Regional buyers are very cautious with the recent market development and there is strong sense of doubting over the sustainability of the firming trend, claiming weak end product businesses.