Asia Daily PP and PE Overview 24 Nov 2016

In China, futures prices on Dalian Commodity Exchange extended the weakening trend, slashing most of the gain recorded in the earlier sessions this week. PP contract edged down CNY119/ton ($17/ton) to close at CNY8464/ton ($1045/ton without VAT). LLDPE contract slumped in larger scale, loosing CNY250/ton ($36/ton) from yesterday to reach CNY9325/ton ($1152/ton without VAT).

Domestic spot market has gained back some balance with price lists for PP and PE remained stable. The fact that converters are holding low inventories have generate moderate number of deals in local market today, mostly at the lower end of the overall price range. A converter said, “We purchased sufficient material for a week while waiting for further reduction. We think the only factor that prevents prices from drastic drop is the low inventories at supplier’s side. However, this is not sustainable if demand does not pick up.” The source added that domestic homo-PP prices might need to reduce up to CNY500/ton ($72/ton) in order to stimulate stronger purchasing activities. 

In the import market, after several major international producer announced December shipment to China, buyers are in the process of negotiating to secure some regular cargoes. A distributor sold Thai HDPE film at $1170/ton, CFR China, LC 90 days term said, “Our customers only take small quantity, pointing to the available of more competitive deep seas cargoes and the recent depreciation of the Chinese Yuan.”

Another trader offer Saudi Arabia material at $1150/ton for HDPE film and $1170-1180/ton for LLDPE film complained, “It is very difficult to convince buyers to accept these levels. We are facing tough time negotiating with customers given the recent large drop in futures and local prices, while the availability of the low cost deep-seas cargoes only make the matter worse. We plan to hold firm on our cargoes though.”

In Southeast Asia, market sentiment is mixed toward the end of the week. Couple of international producers have announced December delivery offers mostly at stable to higher levels compared to last month. A major Saudi Arabia maker opened fresh price list at $20/ton higher for homo-PP but keeping PE prices on stable track. Initial respond from market is not very positive as most buyers are looking at the downward adjustment from other regional makers. However, source close to the company informed, “We are comfortable with the allocation this month and we prefer to hold firm on the available cargoes. Demand in Southeast Asia is weaker, however sentiment should pick up soon in line with the preparation for Lunar New Year.”

A Vietnamese buyer received homo-PP offers from the producer at $1050/ton CIF Vietnam, LC AS term said, “Non-dutiable homo-PP cargoes from Korea concluded at $1030/ton CIF Vietnam, some $40/ton lower than initial offers earlier this week. We think, dutiable origins might face resistance if suppliers insist on selling at similar levels, especially at the current exchange rate situation.”

Another Indonesian buyer added, “Our Thai producer has cut homo-PP prices by $40 from last week, and offered another $30/ton discount for serious buyers. That makes actual deal this week at $1130/ton CIF Indonesia, a $70/ton drop from last week. What we plan to do now is just wait and see.” There is one thing clear in the PP market is that prices are hitting the peak; on the other hand, would suppliers match buyer’s bid to move below the $1000/ton threshold in the near term, it is also unlikely.

In the regional PE market, LLDPE film again shows its resilience against other grades amid a series of low priced cargoes that are stealing the show in near-by China market. A Middle Eastern PE maker, who attempted to lift LLDPE film prices to Vietnam earlier this week, is now offering $20-30/ton discount to close deal at $1190/ton CIF Vietnam, LC AS term. A buyer in the country informed, “Even with the discounts, this cargo still stand at the upper end of the overall price range. We decided not to make purchases this round as we believed market has more room to move lower in the near term.”

At the meantime, Vietnamese traders are struggling to maintain profit margins given the rapid depreciation of local currency, yet unable to increase domestic prices. This explains to why many traders have skipped making fresh replenishment this month, unless larger price reductions are available.