Asia Daily PP and PE Overview 28 Feb 2017

In China, after a brief stabilization, futures market continues to dip lower as the week proceeds. May delivery contract for PP dived CNY176/ton ($26/ton) to reach CNY8580/ton ($1067/ton without VAT) while LLDPE contract loses CNY115/ton ($17/ton) from previous session to reach CNY9620/ton ($1197/ton without VAT).

Trading activities in domestic spot market see little improvement and most PP and PE offers hold stable from yesterday, except LDPE film continue to go down as much as CNY200/ton ($29/ton). “Our customers don’t appear to be interested in our phone call at all,” a trader informed.

Another trader added, “The main issue in local market is still the bloated inventory. However, we think prices might be nearing the bottom as the bear has been running too long. Buyers just need a little encouragement from stronger futures market to be more confident in fresh replenishment. We hope March would be a better month.”

There are very limited movement in the import market and international suppliers portray limited interest to open new offers to China, especially for homo-PP. A trader after discussion with Korean supplier said, “We were informed that the supplier prefer to focus on Vietnam market as China needs more time to digest the current stock. We have not received many offers from other international supplier either.”   

Import PE to the country is galloping lower, especially HDPE film on weak buying interest. Traders continue to slash offers by additional $10-20/ton from last week, touching as low as $1060/ton CFR China level for South Africa cargoes. Even import LDPE film to the country posted an average drop of about $100/ton week on week basis due to the presence of an USA cargoes offered at $1180/ton CFR China, LC 90 days term. Main stream LDPE film prices ranging $1300-1350/ton CFR China, yet attracting little buying interest.

In Southeast Asia, the number of transaction reduces visibly as players are expressing less confident in near term outlook, in line with persistent weak demand in China and softening upstream costs. Several regional suppliers have stepped on their hike target to smoothen sales process while others prefer to hold firm on the available cargoes claiming lack of sales pressure.

In fact, more import HDPE film prices to Vietnam breached below the $1200/ton threshold after a major Saudi Arabia producer slashed prices by $70/ton last week to conclude deals at $1180/ton CIF Vietnam, LC AS term. Import HDPE film prices to Vietnam has been hovering in the mid-point of $1230-1240/ton over the past four weeks, according to CommoPlast data; however, weak demand in addition to competitive local prices and the availability of re-export material from China are sucking out the momentum. A major Thailand producer offered HDPE film at $1230/ton CIF Vietnam LC AS term informed, “Our customers are mostly placing bid at the range $‎1180-1190/ton with the same term claiming softening trend in place. Our plant is gradually regaining normal operation rate, therefore we might need to step back on the hike target.” Couple of deals for this origin are heard at $1190/ton CIF Vietnam later today, yet more information is needed before this could be confirmed.

In another news, Saudi’s PetroRabigh has successfully brought all PP and PE lines on-stream as of 27 February 2017 after an unspecified technical glitch hit the plant during mid-January. Since its scheduled maintenance work in November 2016, the plant has repeatedly facing a number of mechanical issues, preventing smooth operation rate. Source close to the company said, “We might be able to allocate regular quantity for April shipment provided we achieve sustained smooth production. This might ease the current supply tightness in the market to a certain extent.” 

On the other hand, while it appears that import homo-PP prices to Vietnam are stabilizing; Southeast Asian homo-PP offers to Indonesia are softening. In fact, Indonesian buyer reported several deals for Philippines homo-PP yarn at $1195/ton CIF, LC AS term this week, some $25/ton lower than initial prices. A buyer commented, “Domestic material remains competitive this week since actual demand in Indonesia is not supporting such rapid and aggressive hike observed in the import ground recently. Even with the discount, we are not really confident to make large purchases.”

Regional players are expecting to see a price correction to take place in the import PP market as a result of mounting pressure from the competitive re-export material. However, this factor might be the only pressure point at the moment, as deep-seas supply remains tight, market participants said. “Therefore, we are not expecting significant price cut and the sentiment could regain momentum once the number of re-export cargoes diminish,” a trader commented.