Asia Daily PP and PE Overview 26 Oct 2016

In China, futures prices on Dalian Commodity Exchange posted slight decline after two consecutive rally sessions. Contract number 1701 for PP inched down CNY34/ton ($5/ton) while LLDPE contract settled at CNY140/ton ($21/ton) lower. Both contract stand at CNY8172/ton ($1032/ton without VAT) and CNY9625/ton ($1215/ton without VAT) respectively.

In domestic spot market remain resilient despite weaker futures trade as price lists from major makers are up CNY50-100/ton ($8-15/ton) for both PP and PE. On the other hand, buyers take a more cautious stance due a psychological effect. The number of deals concluded in local market therefore drop slightly, according to traders, however, there are several very impressive deals reported in the import market.

In fact, some Saudi Arabia’s homo-PP quantity were concluded at $1050/ton CFR China, LC AS term, though this does not reflect the general current price levels as many others are struggling to attract buying interest at $10-20/ton lower. Trader in Yuyao offers Saudi’s homo-PP at $1030-1040/ton with the same term informed, “Market respond is poor. Our customers prefer to source on need basis from domestic market to take advantage of the exchange rate while many are not in the financial position to keep high inventories at this point of time. Yet, we are optimistic about the remaining time of this year, since low stock on hand would mean continuous replenishment.”

Import LLDPE film from dutiable origins are accepted at slightly above the $1200/ton mark in China today, which is considered as healthier than in the neighboring Southeast Asia region. This is a result of spillover effect from surging LDPE film prices, sources added. In fact, traders have reported to conclude deal for import LDPE cast film at very near to the $1400/ton CFR China term, the level market has not seen since the energy market plunged. Even at such prices, buyers would still accept, as it is more than $100/ton lower than what is offered in local ground at the moment. This has evoked questions amongst Chinese traders that would there be a possibility of Southeast Asian players attempt to re-export cargoes to China?     

In Southeast Asia, market shows clearer sign of a pick up in demand, especially within regional domestic ground. Indeed, players in Vietnam reported visible improved buying interest though prices have yet to increase in large extent. A trader informed, “We sell very well this week and we think with firm international trend, local condition might continue to improve in the near term.”

However, players are not showing great appetite for import cargoes claiming sufficient stock from previous purchases and current high price are not very attractive. A trader received offers for Middle Eastern and South Africa homo-PP at $1040/ton CIF Vietnam, LC AS term said, “Our supplier is willing to give $20/ton discount on deals, yet we still feel not very confident to accept the cargoes due to long shipping time. We are trying to negotiate for additional discount.” On a note, dutiable homo-PP cargoes arrive in January is subjected to 3% import duties instead of 1% at the moment. This is also one of the factors causing buyer reluctant.

Meanwhile, regional PP producers who have lifted their homo-PP prices by $30-40/ton to Indonesia are holding very firm on their cargoes due to lack of sales pressure. A converter informed, “Our Thailand supplier is not open to negotiation as they have very limited supply ahead of the shutdown in November. At the levels of $1120/ton CIF Indonesia, we plan to just replenish a small quantity.”

The PE market is also catching up and more suppliers announced November delivery offers with increases compared to last month. It appears that market has more confidence in November outlook now that purchasing activities in China remains resilient, which would support regional market. Yet, buyers are still cautious with LLDPE film offers above the $1200/ton threshold. Today, a Saudi Arabia producer implemented $30/ton hike on their LLDPE film cargoes from initial offer last month with a distributor commented, “Our customers are not aggressive this round as most have scouted cargoes at lower costs earlier this month. It is year-end and many players prefer to hold minimal stock on hand. We are collecting bids from buyers now.”

Several regional converters, whose end products are mostly mean for export to European market, are reporting a decline in number of orders for t-shirt bags. A source said, “Our customers are holding high inventories, hence refused to place more orders. For this, we think HDPE film market might face real tough time to move higher despite the upcoming shutdowns.”