Asia Daily PP and PE Overview 31 Oct 2016

In China, futures prices on Dalian Commodity Exchange surged drastically right on the first trading day of the week. PP contract concluded at CNY415/ton ($61/ton) higher at CNY8733/ton ($1100/ton without VAT) while LLDPE contract added CNY290/ton ($43/ton) to reach CNY10,045/ton ($1266/ton without VAT).

In domestic spot market, buying interest remains healthy and customers are actively requesting for new offers amid surging futures trade. Local suppliers therefore lifted offers for both PP and PE up to CNY200/ton ($30/ton). A trader in Chengdu reported, “We received a good number of purchase inquiries, yet we are in no rush to sell. Most traders are waiting for November offers from domestic majors and expectation is that price shall continue to increase. We think this trend will not stop until the second half of November.”

In the import market, homo-PP priced below $1050/ton is becoming very scarce with several traders implemented some $30/ton hike on their parcels claiming lack of availability. A trader offers homo-PP at $1080/ton for Saudi Arabia origin and $1090/ton for Indian origin, all based on CFR China, TT in advance term. The source added, “Market respond towards our new offers levels are not very positive as buyers are reporting of more competitive domestic cargoes. We are in no rush to cut prices since these parcels are due to arrive the market very soon.”

Not only import homo-PP continues to increase, LDPE film is also in the picture, with several traders open fresh prices at the range $1400-1420/ton CFR China, TT in advance term for various origins. A trader offered Middle Eastern LDPE film at $1410-1420/ton informed, “Buyers are placing bid at $40-50/ton lower as this cargo is for November shipment, and yet have not make any decision at the moment. Supply is very tight and most cargoes arrival would only take place during late December to early January. Therefore, we prefer to monitor further movement before making the next move.”

Players have attributed such healthy demand to the fact that converters are ramping operation rate in preparation for the China’s Single Day sales this 11 November. For this, sources have brought their concern over the outlook for second half of November with fear demand might weaken if end product orders for Chinese New Year are not sufficient.

In Southeast Asia, the general market sentiment is a little weak on the first trading day of the week though several international suppliers have announced new PP prices with increases compares to last week. However, buyers are showing little interest in the latest offer levels claiming sufficient inventories from previous purchases. A Vietnamese converter received Middle Eastern homo-PP offers at $1070/ton CIF, LC AS term commented, “Prices have escalated too quickly purely based on the demand condition in nearby China market. We have comfortable stock until early 2017, therefore we are in no rush to make new purchases.” In addition, even the upper-end of the domestic prices is more competitive than this import cargo, which reflected challenges international suppliers might face in lifting their offers to the country.

Indeed, an international trader informed, “After down adjusted our homo-PP prices by $20/ton from initial offers, we are still facing intense resistance from our regular customers. Many buyers in Vietnam have purchased large quantity in the previous month in an attempt to avoid higher import duties early 2017. Further price cuts would consume our own profit margins.”

Meanwhile, a major Indonesian producer implemented approximate $30/ton hike on all domestic PP offers after a month holding prices stable, in line with market expectation reported earlier. And interestingly, major traders in the country have withdrawn their offers with expectation of firmer trend in the near term. A market source said, “Demand for PP is still much better than PE grade here. We managed to conclude a good number of PP orders and we think this trend might sustain in the near term.”

In PE market, LDPE film offers to the regional continue to surge with couple of offers from regular suppliers breached above the $1300/ton threshold, yet again, Southeast Asian buyers are not as willing to accept such prices as Chinese players. A converter reported to have received Malaysian LDPE film offers at $1350/ton CIF Vietnam, LC AS term, some $70/ton hike from late last month. The source informed, “Our end product business is good as we are preparing for Christmas orders. However, this price is way above our acceptance levels, hence we decided to utilise our current inventories instead of making fresh purchases.”