Asia Daily PP and PE Overview 08 Nov 2016

In China, futures prices on Dalian Commodity Exchange made a come back, rebounding from several depressing sessions. Contract 1701 for PP leaped CNY196/ton ($29/ton) to reach CNY8536/ton ($1076/tin without VAT). LLDPE contract increased CNY105/ton ($15/ton) to settle at CNY9990/ton ($1259/ton without VAT).

Domestics spot market remains slow and traders are offering CNY50-100/ton ($8-15/ton) discount for both PP and PE in order to close deals. A trader informed, “Some of our customers came back to make small purchases after futures market firmed up, yet most deals are at the lower end of the overall price range.” Couple of domestic traders have discussed about a possibility of reducing LDPE film prices to stimulate trading activities, yet no price cut has been materialised at the time this report is published.

It is reported that many agricultural film makers, whose end product required larger portion of LDPE film, are now suffering from serious negative margins due to continuous rising raw material costs. 

The number of transaction in the import market is also limited partially due to weakening Chinese Yuan. Import homo-PP to the country has softened slightly compared to last week with prices below the $1050/ton threshold re-emerged again after couple of weeks disappeared. Fresh offers from a major Saudi Arabia producer stand at $1040/ton CFR China, LC AS term while USA homo-PP injection dropped $10/ton to reach $1020-1030/ton, LC 90 days. A trader said, “Prices are not having much room to increase further though supply is still tight. Our customers only buy hand to mouth basis and very few people show interest in cargoes offered at the upper end of the overall price range. The recent price hike in China has attracted a good number of parcels from overseas suppliers, therefore we believed that supply shall be eased soon.”

In Southeast Asia, market has yet to see any drastic changes and buyers are holding strong cautious stance towards fresh purchases claiming lack of confidence in near term outlook. All eyes are on the recent development in the energy and upstream markets, which is expected to cast negative effect on the general sentiment.

A major Saudi Arabia producer announced new PP and PE prices to Vietnam at stable to firmer levels compared to the last settlement late October, reaching $1190/ton for LLDPE film, $1140/ton for HDPE film and blow moulding and $1050/ton for homo-PP yarn and injection, all based on CIF Vietnam, LC AS term. A distributor offered on behalf of the producer informed, “Initial market respond is not very positive as our buyers mostly carry comfortable inventories. Besides, the recent drop in upstream costs also affected market confidence. We received some inquiries for HDPE cargoes, but buyers are asking for $30/ton discounts."

Demand for HDPE film across the region is still trailing behind other grades in spite of the shutdown at major Southeast Asian plants. In fact, a Thailand producer rollover their HDPE film offers to both Indonesia and Vietnam market at $1190/ton and $1155/ton respectively with a source close to the maker informed, “We have maintained this price for two weeks now and still unable to attract much buying interest. We only have a small quantity of HDPE film, while other units are under shutdown now.” The source added that it is very challenging for HDPE market to move higher at the current demand condition and that margins of producing HDPE remain in the red zone despite large reduction in ethylene costs.

In the PP market, suppliers continue to up adjust their offers with lethargic buying interest at the background. And signs of softer import homo-PP prices to China add more concern amongst players. An Indonesian converter received offers for Vietnamese homo-PP yarn at $1140/ton CIF Indonesia, LC AS term said, “We are in dilemma whether to accept the offers as we feel it is too high. We are having some inventories on hand, yet, we feel suppliers might attempt to hold firm on their prices in the absence of sales pressure.”

Other buyers in the country are firmer on their decision pointing to not only unsupportive energy and monomers costs but also the unstable domestic political condition. A source said, “In such situation, we prefer not to keep high inventories for both material and end products. We think prices are reaching the peak at this cycle and buyers might not accept further hike.”