Asia Daily PP and PE Overview 23 Feb 2017

In China, futures prices on Dalian Commodity Exchange continue to move lower with May delivery contract for PP loss another CNY160/ton ($23/ton) to close at CNY8640/ton ($1073/ton without VAT). LLDPE contract meanwhile fell CNY215/ton ($31/ton) to reach CNY9645/ton ($1198/ton without VAT).

Domestic spot market starts to show some improvement in term of purchasing activities, yet traders continue to slash prices in order to boost demand. PP and PE offers drop in the range CNY50-150/ton ($7-22/ton) while LDPE film witness downward adjustment by as much as CNY250/ton ($36/ton) from the previous session. A trader commented, “Buyers are catching the bottom as prices has been going down for an extended period of time, yet most purchases are still in small quantity. At the moment, offers at the upper end of the overall price range are attracting very limited attention.”

In the import market, LLDPE film prices are softening with Brazilian and USA cargoes concluded below the $1150/ton threshold today in spite of the short lead time come with these cargoes. On an average, import LLDPE film to China weakens $60/ton from week earlier, CommoPlast data show. A trader sold USA LLDPE film at $1140/ton CFR China, LC 90 days term said, “We slashed our prices by $50/ton from last month though the cargoes are arriving soon. Demand from the agricultural film sector is just so disappointed as persistent weak futures market casted tremendous pressure on spot ground. We are just not so optimistic about the near term outlook.” Even with such pessimism, the number of deal concluded for LLDPE film is still considered better than LDPE film, players said.

For homo-PP, re-exporting to nearby Southeast Asia market is still a highly preferred option amongst traders here. However, competition is getting stronger and couple of suppliers decided to open export prices (based on FOB Ningbo term) below the $1100/ton threshold for USA origin cargoes.   

In Southeast Asia, sentiment in the regional PP market slid quickly as more re-export homo-PP cargoes from China emerge at lower prices. Import offers from Saudi Arabia suppliers touched the $1200/ton threshold earlier this week and fell quickly afterward. In fact, traders are offering same cargoes at $45/ton lower than official price list, at $1155/ton CIF Vietnam, LC AS term today. A buyer received the lowered offer commented, “This is very worrisome as market come down too quickly. This could impact the domestic ground in the coming days.”

Meanwhile, another Saudi Arabia producer lifted homo-PP prices to Vietnam by $110-120/ton in the previous trading day, has conceded to larger than usual discount to close deals at $1150/ton CIF Vietnam, LC AS term. A market source added, “Most cargoes takers are converters as traders have no confident in the near term outlook. The heavy in-flow of re-export material is pulling market down and prices at the upper end of the overall price range might be affected the most.”

In fact, for the past two trading days, re-export homo-PP offers have been steadily softening with latest deals concluded for USA origin cargoes stand at $1080/ton FOB Ningbo, China to Vietnamese buyer (equivalent to $1100/ton CIF Vietnam). Players believed that the lower end of the overall price range might start to stabilize in line with the better market acceptance for these levels.

In the regional PE market, another Saudi Arabia producer announced fresh offers to Southeast Asian region with $60/ton month on month increase for HDPE film and $40/ton for LLDPE film, reaching $1230/ton and $1260/ton respectively, all based on CIF Southeast Asia, LC AS term. Initial respond from the market is not very positive, pointing to high raw material prices and weak end product demand. An Indonesian buyer commented, “The producer’s LLDPE film price is near to what domestic suppliers are offering on delivered term at the moment. We think that the maker might face difficulties in achieving full hike target.”

At the meantime, LDPE film supply within the region remains tight and buying interest appears to be better than other grades. Deals concluded for Malaysian origin LDPE film hold above the $1400/ton threshold with an international trader added, “We sold some Malaysian LDPE film at $1410/ton today. Regular buyers continue to send in purchase inquiries, however we are not having sufficient allocation.”