Asia Daily PP and PE Overview 13 Feb 2017

In China, futures price skyrocketed after four straight falling sessions last week. May delivery contract for PP surged CNY351/ton ($51/ton) and erased most of the losses recorded in the previous trading days, to reach CNY9548/ton ($1184/ton without VAT). LLDPE contract jumped CNY385/ton ($56/ton) to close at CNY10605/ton ($1316/ton without VAT).

Significant hike in futures trading pushed domestic spot offers for both PP and PE up by as much as CNY150/ton ($22/ton), except LDPE film prices remain mostly unchanged. With such drastic movement on Dalian Commodity Exchange, futures prices are now about CNY350-450/ton ($51-65/ton) higher than the average spot offers, attracting great attention from traders. The number of transaction on futures market has also improved visibly, from which it is reported that Dalian Commodity Exchange has appointed three more official warehouses to deal with the surge in inventories. In contrast, converters are still holding much of the wait and see stance, as many prefer not to rush making purchases on the first trading day of the week.

In the import market, Saudi Arabia suppliers started lifting homo-PP offers to the country by approximate $30/ton from last week, reaching $1090-1100/ton CFR China term. An international trader added, “Our Middle Eastern supplier does not allocating any homo-PP cargoes to China, claiming better margins achieved in Vietnam. Our regular customers are sending in inquiries, though many are still asking for low prices. Futures market firmed up significantly today, and we hope buyers would be more active in the coming days.” However, even offers at the level $1080/ton CFR China, it is already approximate CNY300/ton ($44/ton) higher than domestic material, therefore, overseas suppliers might face difficulties in achieving full hike target at the moment, players said.

There are also several deals for import HDPE reported, though suppliers have to concede to discounts. A trader sold Egypt, India and Mexico origin HDPE cargoes at $1130/ton CFR China said, “Prices below the $1150/ton threshold are still attractive to customers, yet these levels might not be available for too long as suppliers are able to achieve better margins in other markets.”     

In Southeast Asia, import homo-PP to the region continue to journey north as sellers underline the fact that market is lack of availability while feedstocks are firming up. However, buyers start to show some initial signs of reluctance to accept such rapid hike, claiming slow end product businesses and squeezed margins.

An Indonesian buyer received $100/ton hike for South Africa’s homo-PP cargoes compared to last month, reaching $1170/ton CIF Indonesia, LC AS term. The source commented, “We are not planning to accept the new offers even with discount as our end product businesses remain mediocre.”

In Vietnam, players are mostly waiting for fresh offers from a major Saudi Arabia producer and there are very limited numbers of new prices observed on the first trading day of the week. Couple of dutiable cargoes emerged at higher levels compared to last week, and several buyers here have also portrayed their lack of confidence in the market outlook. A trader informed, “Prices are too high and we have stopped purchasing any homo-PP cargo by now. Even domestic buyers are no longer aggressive this week but turn to buy based on need basis. We think the firming trend in Southeast Asia market might loose speed if Chinese buyers remain conservative.”

It is still uncertain if such minor resistance would discourage sellers from continued lifting their offers in the coming week; at the moment, most suppliers are keeping the firming trend in sight.

In the regional PE market, ethylene price based on CFR Northeast Asia hit the $1300/ton threshold last Friday as per market expected earlier, however, the implication on the downstream PE market does not seem pleasant to buyers. Import offers for both HDPE and LLDPE film hold large stable from last week though room for further increment is still available, players said. Re-export offers are not repeated in Vietnam on the first trading day of the week.

Meanwhile, LDPE film supply is tightening with the shutdown at several regional and international plants. Malaysia’s Lotte Chemical Titan, Thailand’s PTT and Taiwan’s Formosa are having overhaul during February and March. With these three plant shutdown, market sees an estimated production loss of nearly 45,000 tons of LDPE during the period. And if Qapco confirmed two weeks shutdown in March (which the producer is planning to postpone to April), the number might jump to over 73,000 tons – a considerable amount to support the firming trend, in addition to the current ethylene costs.

A regional buyers commented, “We normally deal with Malaysian LDPE film and our supplier has been having very small allocation for few months in a row. With the current supply situation, we think new offers from the producer might be near to the $1450/ton threshold.”