Asia Daily PP and PE Overview 27 Oct 2016

In China, futures market weakens slightly with contract 1701 for PP inched down CNY40/ton ($6/ton) while LLDPE contract slashed CNY35/ton ($5/ton). Both contracts settled at CNY8099/ton ($1021/ton without VAT) and CNY9565/ton ($1206/ton without VAT) respectively.

In domestic market, sentiment in Eastern China area appears to be quieter, in which traders decided to offer small discount of CNY50-100/ton ($8-15/ton) on PP cargoes to entice demand. However, players are not expecting any significant reduction as total PP and PE inventories at major local producers’ warehouses have reached multi-years low today, building solid foundation for firmer trend in the near term. The general buying interest might hold at the current tempo until mid-November, players said, due to the preparation for annual China's Singles Day sales on 11 November.

In addition, market sources reported that Shenhua XinJiang Coal-based New Materials Project is forced to shutdown its newly started up coal based PP plant this morning due to some unexpected technical issues. The plant is designed to produce 450,000 tons/year and the restart schedule could not be ascertained. This explains to why many domestic suppliers are holding back on the cargoes with aim to achieved better margins in coming days.

The import market remains on the stable to firming track. Many traders continue to buy prompt HDPE cargoes including film and blow molding grades after rumor about technical issues at Iran's MEHR Petrochemical spread. The plant is capable of producing 300,000 tons/year of HDPE. “We believed that any hike in HDPE market would be short life as more cargoes will be arriving during Dec-Jan period including non-mainstream origins such as Brazil and Mexico. We also expect USA supplier to divert some cargoes to China during this period to deplete stock before book closing.”

In Southeast Asia, the regional domestic markets continue to see improving demand condition, especially in Indonesia and Vietnam, where buyers are taking action to replenish additional quantity in expectation of firmer prices in the near term.

An Indonesian converter active in the PP sector informed, “We have only stocked up sufficient material till end of November 2016, and we planned to replenished two weeks more worth of inventories within these few days. International suppliers have lifted their prices with strong support from China market and domestic sellers might follow suite.”

Players in the country are also expecting local PP supply to be tightened in the coming month with the planned shutdown at Chandra Asri’s 480,000 tons/year PP unit. However, up to this moment, domestic makers have not adjusted their price list for almost four weeks in a row. Source from a local producer reported, “We have no more stock for homo-PP at the moment. Demand for homo-PP yarn is a little bit weak, but injection grade fetches more interest. We think prices should move higher with the support from international trend.”

Meanwhile, in Vietnam, domestic PP and PE prices have extended the firming trend, though the extent of price increment remains narrow. It is reported that local PP supply in Vietnam is rather comfortable with the arrival of the previous purchased cargoes, which might limit traders’ effort to lift their offers significantly. There have been market talks of a re-exported PP parcel from Vietnam to China; however, there is no confirmation at the time this report is published. A trader commented, “We are happy with the current state of demand and we plan to replenish some cargoes from local stockists. If this condition persist in the coming days, further price increment is possible, just that large hike might face resistance.” 

In the import market, suppliers are holding very firm on their offers claiming lack of inventories pressure after achieved healthy sales in China market. Most LLDPE film offers from Middle Eastern producers have reached $1200/ton and above and several deals are reported at $5-10/ton discount. A regional buyer commented, “We have purchased a large quantity earlier this month and we have no plan to take additional quantity this time as prices are way higher than our acceptance levels. We think the LLDPE market might sustain the firming trend in the near term, and we prefer to monitor further development before making any major decision.”