Asia Daily PP and PE Overview 02 Nov 2016

In China, futures prices on Dalian Commodity Exchange turn south after recorded impressive rally in the past two sessions. PP contract slumped CNY237/ton ($35/ton) while LLDPE weaken CNY80/ton ($12/ton). Both contract settled at CNY8428/ton ($1066/ton without VAT) and CNY9945/ton ($1257/ton without VAT) respectively.

In domestic spot market, traders are offering CNY50-100/ton ($8-15/ton) discount on PP cargoes due to slower buying interest. Meanwhile, PE offers continue to increase in the range of CNY50-200/ton ($8-30/ton) for LLDPE and HDPE and CNY200-450/ton ($30-67/ton) for LDPE film.

Significant reduction in futures trade caused trading activities in domestic spot market sank visibly today with a trader in Ningbo said, “We offered some discount but respond from buyers is very poor. It seems converters have completed replenishment in preparation for the China’s Single Day sales event. Market therefore might enter the stable stage soon and further price increment might face difficulties to attract buyers.”

Players in Northern China area, where most converters in the agricultural film sector located, are reporting of a slow down in demand as the peak season is partially coming to an end. Traders are also loosing confidence over the LDPE film market, complaining about strong buyer’s resistance toward offers at that upper end of the overall prices range. It is observed that many traders have turned down offers for LDPE film cargoes to be shipped end of November to beginning of December, preferring only prompt parcels at the moment. A Xiamen based trader said, “Lanzhou Petrochemical have stabilized its production after resumed operation earlier October and their LDPE film cargoes are arriving Southern China market in days. Second half of November therefore possesses very high risk.”

In Southeast Asia, there are little changes in the general sentiment and trading activities and players are discussing about the near term market direction for PP after propylene costs based on FOB Korea term has fallen $95/ton since it hit 15 months high during mid October. There are diverged opinions reported, however most have pointed to a stable to firmer trend amid active plant shutdown during November 2016. An international producer informed, “Most suppliers are not having inventories pressure at the moment after achieving satisfactory sales result in China recently. We believed that market would sustain the stable to firmer trend in the coming month as preparation for Lunar New Year shall take place soon which boost demand amid tightening supply.”

Meanwhile, Indonesian players reported calmer trading activities in local market as most buyers have obtained needed quantity and currently switch to purchase hand to mouth basis. Similar to Vietnam market, import homo-PP to Indonesia at the upper end of the overall price range is facing stiff resistance. A converter received Saudi Arabia’s homo-PP yarn at $1040-1050/ton CIF, LC AS term commented, “There are only few suppliers open new offers at increases compared to last month since most have diverted their cargoes to other market where better margins can be achieved. The recent price hike is mostly driven by expected tightening supply due to upcoming plant shutdown while demand in China is healthy. We have comfortable stock until end of the year, hence we decided to postpone our purchases till December, when most producers have resume operation.”

The regional PE market remain much calmer than PP with very limited number of new offers emerged at higher levels, especially for LDPE and LLDPE film. A Malaysian maker lifted LDPE film prices to $1300/ton CIF SEA, LC AS term said, “We have very small quantity for Southeast Asian customers this time but buyers are not responding very well to such hike. On the other hand, we believed that prices might hold firm in the near term as long as demand from China remain healthy.”

HDPE film market is still struggle to find its way north in spite of couple of shutdown. Buyers continue to complain about weak end product business while traders mostly earn no profit re-selling in domestic ground. An Indonesian trader informed, “This condition has been in place since earlier this year and until now domestic HDPE market remain very sluggish. With the recent levies on shopping bags, we think market might face further pressure in months to come.”