Asia Daily PP and PE Overview 27 Feb 2017

In China, futures market started to regain some balance after nearly two weeks of continuous weakening. May delivery contract for PP gained CNY30/ton (4/ton) from the last session to close at CNY8687/ton ($1079/ton without VAT). LLDPE contract meanwhile only loss CNY5/ton ($1/ton) to reach CNY9675/ton ($1202/ton without VAT).

In domestic spot market, traders are attempting to stabilize the market following the futures trades, in which offers for both PP and PE only edge CNY50/ton ($7/ton) lower from last Friday. It is reported that the number of deals in domestic ground are improving, though the quantity remains small. A trader in Xiamen said, “Demand is coming back in very slow pace. Market needs stronger replenishment activities to digest the current inventory. We think prices might not be able to rebound if stock remain at the current condition.” In fact, players are reporting that local total PP and PE inventories are hovering around record high level, an in spite of limited offers from international suppliers, there is no adjustment in domestic operation rate, which could hold supply outpace demand in the coming weeks.

In the import market, there are very limited movement from overseas suppliers observed on the first trading day of the week, however, one sight clear is that Chinese traders are actively seeking for opportunity to divert their cargoes to other markets. A Zhejiang based trader informed, “We sold some parcels to South America recently, however, most go to Southeast Asia. At the moment, we think the tempo in SEA market is loosing momentum, as buyers are getting uncomfortable with an increasing number of re-export material. However, we might need to keep re-directing our cargoes to other markets as supply here is really lengthy.”

In Southeast Asia, buyers across the region remain relatively calm on the first trading day of the week amid limited number of new offers while many are negotiating to conclude deals for cargoes offered in the previous week. It is interesting that more re-export material emerge in Vietnam, including both PP and PE from wider range of origin.

In fact, USA and Saudi homo-PP re-export from China both stand at $1150/ton CIF Vietnam, LC AS term for late March to early April arrival. A buyer commented, “The PP market is stabilizing and prices above the $1150/ton threshold are facing stiff resistance from buyers. We see the supply tightness in local market is now eased and therefore, we do expect a small discount on deals for import material in the near term.”

In a separate news, Indonesia’s PT Polytama Propindo unexpectedly shutdown the PP line this morning after encountered propylene (C3) supply disruption from Pertamina. Initial estimation is that the 180,000 tons/year PP unit would resume normal operation within 24 hours if feedstock supply become normal. Yet, fresh price announcement from a major local producer hold steady week on week basis and demand is described as lethargic. A trader offers homo-PP at $1260-1270/ton FD Indonesia said, “Trading activities are rather calm and at the moment we see only healthy demand for PP thermoforming grade. Buyers are negotiating very aggressively on deal and we offer $10-15/ton discount on cash payment.” And therefore, Indonesian buyers are not showing much interest in import cargoes priced above the $1200/ton threshold.

In the PE sector, ethylene cost continue to soften and dampens buyers confident in the near term outlook. However, sellers are not hesitating to implement further hike on their cargoes. Indonesian and Malaysian buyers reported to have received Singapore’s HDPE film offer at $1310-1320/ton CIF/DAP, LC AS term, which is way above the market acceptance level. An Indonesian buyer commented, “Even domestic material is lower than this offers and with the current demand condition in China, we are not confident enough to make purchases at such high prices.”

Another international trader is less of firmness on the available cargoes added, “We offered Philippines HDPE at $1215/ton CIF Southeast Asia, however, demand within the region is not very strong and buyers here are watching out for new movement in China before making decision. We are open to negotiation.”