Asia Daily PP and PE Overview 25 Oct 2016

In China, futures prices on Dalian Commodity Exchange continue to increase impressively, especially for PP futures. January delivery contract for PP skyrocketed CNY305/ton ($45/ton) from yesterday to reach CNY8246/ton ($1041/ton without VAT) while LLDPE contract also increased CNY130/ton ($19/ton) to settle at CNY9675/ton ($1221/ton without VAT)

Domestic spot offers start to heat up again after two consecutive sessions of gaining in futures trading. On an average, spot PP and PE prices firmed up CNY50-200/ton ($8-30/ton) and LDPE again surge CNY150-300/ton ($22-44/ton). In line with higher prices, purchasing activities are also very healthy. A trader implemented CNY150/ton ($22/ton) hike on their homo-PP cargoes informed, ¡°We managed to sell out 50 containers of material without any discount.¡± Many other traders reportedly suspended their offers towards the afternoon with expectation of further price increment in the next trading day.

The LDPE film market has firmed up significantly and prices are similar or exceeded of metallocene PE grade now. It is interesting that players are not expecting the peak yet claiming supply tightness condition has yet to ease. A buyer informed, ¡°Even off-grade LDPE film from Middle Eastern are being auctioned at $1300/ton CFR China levels. We think market might head towards the $1400/ton threshold soon.¡±   

In Southeast Asia, more regional and international producers announced fresh PP and PE prices with mostly stable to firmer trend. It is interesting that each market is focusing on different area that reflects the domestic situation. In fact, players in Indonesia are reporting limited availability of LLDPE film cargoes, resulted from couple of local production hiccups previous weeks. ¡°Yet, we find it difficult to increase our offers but remain hopeful for brighter outlook in the near term,¡± a trader said.

Meanwhile, in Vietnam, traders appear to be more interested in LDPE film cargoes believing that healthy demand in nearby China market would stimulate firming trend in the country. Some have expressed their interest in HDPE parcels as pro-long weak demand condition in domestic market has discouraged traders to bring in import material, from which players believed might result in tightening domestic availability. A good sign in Vietnam market is that demand started to pick up, which is reflected in better number of deals traders reported. One of the market sources informed, ¡°Domestic converters are asking for material and we managed to lift prices slightly compared to last week. The general end product business is still weak, hence buyers are not purchasing large quantity to protect cash flow, especially it is year end now.¡±

In the import market, after several producers announced November delivery offers, buyers are negotiating before closing deals. A regional buyer placed bid for Saudi Arabia¡¯s LLDPE film at $1180/ton CIF, LC AS term, commented, ¡°We are waiting for final price confirmation by tomorrow. We think supplier might try to hold firm on their offers, however, we only can accept such price at the moment since the shipping time is long and ethylene costs are softening.¡±

The PP market also sustains the firming trend as suppliers claim lacking of sales pressure. A major Malaysian producer lifted homo-PP prices by $40/ton to Indonesia this week, reaching $1140/ton CIF, LC AS term and a buyer said, ¡°The supplier refuse all negotiation and we think we might source some cargoes from domestic market since prices are more competitive.¡±

Similar situation is reported in Vietnam market where prices at the upper end of the overall price range catches very limited buying interest. This shows the difficulties sellers face in lifting their offers and this condition might deepen in the coming month as companies attempt to reduce inventories during year end period.