Asia Daily PP and PE Overview 24 Feb 2017

In China, futures market concluded the final trading day of the week on softer notes, marking eight straight falling sessions. However, the extent of price reduction is much smaller, stemming expectation that the bottom is near. May delivery contract for PP inched CNY20/ton ($3/ton) lower to reach CNY8656/ton ($1077/ton without VAT). LLDPE contract decreased CNY50/ton ($7/ton) to close at CNY9675/ton ($1204/ton without VAT).

In domestic spot market, trading activities started to see some improvement as the stabilising futures trade encourage players to make replenishment, though buyers are still cautious with the purchased quantity. Despite a slight pick up in buying interest, domestic suppliers continue to offer discount of CNY50-100/ton ($7-15/ton) on both PP and PE cargoes, except LDPE film fell another CNY200/ton ($29/ton) from yesterday.

Domestic prices might not be able to jump up significantly in the near term, unless demand comes back healthy, as local inventories are hovering around record high levels. Market sources informed that total PP and PE inventories at major local producers’ warehouses are at above 1 million tons while many import cargoes arrival are still stuck at the main port while traders struggle to local suitable storage.

A BOPP sheet manufacture informed, “We started to receive some end product orders today, however, we need to monitor the sustainability of the latest market development before making major decision.” It is also heard that commercial size woven bag manufacturers in the country are lifting operating rate, which might indicate better outlook in the coming month.

In the import market, traders are cutting HDPE film prices in order to smoothen sales process. Offers for Thailand’s HDPE film are now $40/ton below producer’s price list, reaching $1160/ton CFR China, LC AS term. A trader source said, “Local inventory is high while converters are not willing to accept prices around the $1200/ton threshold as it would be higher than domestic material. Even after the price adjustment, we only managed to conclude few deals.”   

In Southeast Asia, more regional and international suppliers announced fresh prices with substantial hike compared to last month, claiming tight availability and higher production costs. However, market appears to be reaching the peak and most deals for both PP and PE are reported at larger than usual discount for both PP and PE.

In fact, a major Saudi Arabia producer earlier this week implemented $100/ton hike on HDPE film offers to Vietnam for March shipment reaching $1250/ton CIF, LC AS term and $60-70/ton increased on LLDPE film at $1260-1270/ton with the same term. Yet, several deals are reported at well below the offered levels. A buyer purchase the parcels at $1220/ton for LLDPE and $1180/ton for HDPE film commented, “The supplier has only less than 50 per cent of regular allocation this month, and hence each regular customer only get one container of material. Despite such tightness, we think market has reached the peak and might hover around this range in the near term.”

In related Plant Status, PTT Thailand has cancelled maintenance shutdown schedule at its no. 1 ethylene cracker, which was initially planned for March. Source close to the company informed that the company has yet to re-schedule the overhaul and therefore, the 1 million tons/year cracker would remain running until further notice.

In the PP sector, market seems hitting the peak and dutiable cargoes priced nearing the $1200/ton mark are now coming down to the range $1150-1170/ton. Traders are taking the lead in down adjusting their offers in the face of strong competition from re-export material. In fact, a regional trader slashed offers for Saudi’s homo-PP yarn by $45/ton from the producer’s official price list given earlier this week, to reach $1155/ton CIF Vietnam, LC AS term. A buyer commented, “This cargo is shipped from Saudi Arabia port, instead of from bonded warehouse in Southeast Asia. However, the large price differential has also created a lot of concern among market players. We have purchased some re-export parcels from China at lower levels, hence, we are not planning to take additional quantity for deep-seas shipment.”  

Within Indonesia, buying appetite is also diminishing and local traders are raising concern that softening import market would affect the local ground; especially when supply is expected to improve with Polytama resumed operation. A trader commented, “Local prices have not responded to the firming international ground in the previous weeks and at the moment hold more competitive position than import material, therefore we are not expecting domestic ground to see any large discount in the coming days.”