Asia Daily PP and PE Overview 16 Jan 2017

In China, futures prices on Dalian Commodity Exchange surged significantly on the first trading day of the week. Players attributed such movement to the strong speculative activities based on the believed that supply would tighten in the near term as government step up effort to cut excess capacity and curbing industrial pollution. May delivery contract settle up CNY424/ton ($62/ton) for PP to reach CNY9199/ton ($1141/ton without VAT). Meanwhile, LLDPE contract gained CNY295/ton ($43/ton) to close at CNY10270/ton ($1274/ton without VAT).

Despite the drastic hike in futures trading, buying interest in spot market remains well below expectation as many converters have already left their desks for holidays. Traders, on the other hand, lifted spot local prices for PP by CNY100-200/ton ($15-29/ton) from last week. In contrast, PE offers hold mostly steady and LDPE prices even softened CNY50-100/ton ($7-15/ton).

It is reported that PP converters are very cautious about building stocks amid dropping in end product demand. Couple of manufactures informed they have reduced end product prices to attract more orders, however, they might only replenish raw material after seeing the result. Traders, however, have another option of mobilizing their cargoes from spot to futures market to leverage the arbitrage opportunities.

A trader active in trading import homo-PP informed, “There were approximate 800 tons of USA and Russian homo-PP yarn offered to the market last Friday at $990/ton CFR China, LC 60 days term. For today, we received nothing below the $1030/ton mark. Several of our regular customers are pushing for final purchases this round, asking for larger quantity and trading activities shall diminish toward the end of the week.”

International PE suppliers have also brought up the intention to increase their offers to the country amid the availability of competitive deep seas cargoes. A trader offered Mexico’s LLDPE film at $1090/ton and LDPE film at $1250/ton CFR China term said, “Buyers are still considering, however we do see the interest. Many others are still questioning the sustainability of the futures trading trend. We personally think that market could sustain the stable to firm trend.”  

In Southeast Asia, there are very limited numbers of new offers reported on the first trading day of the week while buyers are discussing about possible trend for February shipment offers. Most opinions are pointing to the stable to firmer trend for the next price announcement considering the upcoming plants and crackers shutdown, while troubled refineries have lend some support to naphtha cost in the past week. A Vietnamese buyer commented, “Our Saudi Arabia PE maker might open new prices tomorrow. Despite the fact that the maker did not completely sell off their allocation last month; we believed that February shipment offers would remain on the stable to firmer trend.” The source added that it is still difficult for import LLDPE film to surge significantly as domestic market remains bloated with existing supply. Yet, tight HDPE film availability in local ground might encourage some small increment from overseas suppliers.

Meanwhile, converters, especially HDPE bags manufacturers, in Malaysia and Indonesia are complaining about difficulties they face in transferring higher raw material prices to their end products. A market source informed, “Our customers are resisting higher end product prices, which resulted in very thin margins for us. Therefore, we think any possible price hike from international makers might be limited.” Couple of Vietnamese converters in the same field is planning to stop operation earlier than usual for Lunar New Year holidays in the face of lackluster end product businesses.

Regional PP market if flat today and most suppliers are monitoring further development in nearby China market before announcing new offers. A Middle Eastern producer informed, “We are discussing about the new offers and might give mass announcement in the next couple of days. The general demand condition in Southeast Asia is not very robust, yet we plan to hold firm on our prices due to lack of availability.”

Purchasing activities in local Vietnam market has not seen a strong pulse despite post holiday supply might be tightened due to lack of cargoes arrival. Meanwhile, major suppliers in Indonesia have rolled over their local offers and players continue to report limited supply for PP film grade.   ?