Asia Daily PP and PE Overview 20 Feb 2017

In China, futures market opens the first trading day of the week on soft notes, extending the weakening trend, which has been in place since last week. However, the extent of price reduction is smaller. May delivery contract for PP inched CNY45/ton ($7/ton) lower to settle at CNY8937/ton ($1112/ton without VAT). LLDPE contract only slipped CNY15/ton ($2/ton) to reach CNY9925/ton ($1235/ton without VAT).

Domestic traders continue cutting offers by CNY50-100/ton ($7-15/ton) for both PP and PE to attract buying interest, yet many still feel disappointed with the results. Therefore, several traders are offering on hand cargoes at CNY100-200/ton ($15-29/ton) below futures prices, hopping to open up the arbitrage window again, which could bring back the opportunity takers. A trader in Zhejiang sold local homo-PP at CNY200/ton ($29/ton) lower than futures contract said, “We only managed to sell off a small quantity since most manufacturing buyers are still reluctant to replenish material, complaining of slow end product business. Traders are attempting to take position, but with caution given tight cash flow. We think market might need longer time to recover.”

In the import market, traders are becoming more active in re-directing their cargoes to nearby Southeast Asia market, where demand still exists, especially for homo-PP. A trader sold Russian homo-PP at $1115/ton to Vietnam from warehouse in Zhejiang said, “Buyers are negotiating very hard due to the irregularity of this origin. We earn very thin margin on this cargo, however we prefer not to wait for local market to improve.”

There are very limited numbers of new offers in the PE market, and suppliers mostly hold firm stance on the prices with the support from the upstream ethylene costs. Import LLDPE film to China remain in the range $1180-1200/ton for mainstream cargoes, yet respond is rather calm. “Anything above the $1200/ton threshold is already higher than domestic material, hence even with strong upstream costs, buyers might not show much interest in the import material at the moment,” a market source commented.

In Southeast Asia, buyers across the region are still holding a strong sense of caution despite continued firming trend observed in the upstream market. There are only a moderate number of new offers available on the first trading day of the week, mostly at stable to slightly higher than last week. In fact, major Thailand maker decided to rollover their PP and HDPE offers to Indonesia for this week given persistent sluggish buying interest in the country. A buyer commented, “Import prices are too high at the moment, some grades are even higher than domestic cargoes. Converters meanwhile are not seeing improvement in end product business, hence, we believed that market would continue to show limited interest in the latest prices.”   

Meanwhile in Vietnam, the general sentiment is heavily scented with the concern over a high number of re-export homo-PP cargoes from China these two weeks. Buyers are here are seeing a possible weakening trend if Chinese buyers remain uninterested in making replenishment in the next couple of weeks. A trader commented, “The origins of re-export material are really varied and prices are no higher than the $1160/ton mark. We therefore, feel very concern over the market prospect in the near term despite a strong gain in propylene costs.”

In the regional PE market, the rapid hike in ethylene costs, especially in the Northeast Asia region, is strengthening market expectation for firmer PE offers in the near term. However, at the moment, the acceptance toward the current prices is still mediocre. A Thailand producer reportedly lifted HDPE prices to Vietnam by $10/ton from last week to reach $1235/ton for blow molding and $1240/ton for yarn grade, all based on CIF Vietnam, LC AS term. Source close to the producer informed, “We have very limited allocation for March delivery as our plant is still operating at reduced rate. At the moment, we are seeking more opportunity in the upstream ethylene market. Some of our regular customers have accepted the latest increment.

Meanwhile, Korean’s LLDPE film offered to Vietnam is nearing to the $1300/ton threshold today as the supplier claimed lack of sales pressure and high production cots. A buyer informed, “Vietnamese converters are still unable to accept such high price at the moment despite the strengthening ethylene market. However, our supplier wowed to lift LLDPE film prices to above the $1300/ton mark in the near term regardless of the market resistance.”