Asia Daily PP and PE Overview 03 Mar 2017

In China, futures market started to move to the green zone with May delivery contract for PP increased CNY71/ton ($6/ton) from the previous trading day, to settle at CNY8622/ton ($1068/ton without VAT). LLDPE contract has also managed to remain positive, adding CNY5/ton ($1/ton) at CNY9660/ton ($1197/ton without VAT).

Domestic spot market, however, remain on the same pace with traders continue to offer discounts of CNY50-100/ton ($7-15/ton) on both PP and PE cargoes despite stronger futures trading. Players are looking forwards for a stronger rebound on Dalian Commodity Exchange, which might encourage more confident among buyers in making fresh replenishment. A trader commented, “Our regular customers are still sourcing on need basis as the recent gains in futures market appear to be just a technical adjustment after an extended period of weakening. We might continue to pay close attention to further movement in the coming week, though we are not planning any significant price cut.”

In the import market, traders slashed offers for Qatar LDPE film price by $80/ton from last week to reach $1250/ton CFR China, LC AS term. A Zhejiang based trader said, “We have cargoes at bonded warehouse at the same price level. We are making loses of approximate $100/ton on these parcels as market is correcting itself. We hope prices might stabilise in the coming weeks, just yet, local inventory must be digested first.” The supply tightness for LDPE film reported in the previous months is now eased with players see no difficulties to obtain material in both import and local ground.

A major Indian producer has announced fresh homo-PP offers to China at $1060/ton CFR China, LC 30 days term and despite the offer is lower than other Middle Eastern material, respond from market is rather disappointed. A trader said, “The shipment will only arrive in June, which is too much of uncertainties involved. At the moment, we only prefer to source cargoes in local market.”

In Southeast Asia, market sentiment is rather calm toward the end of the week and market is still struggling to determine its possible direction. While major Saudi Arabia producer slashed homo-PP offers to Vietnam to conclude deals at $1130/ton CIF Vietnam LC AS term; Indian maker continue to lift prices to the region. Both Vietnamese and Indonesian buyers reported to have received fresh homo-PP from an Indian producer at $1200/ton CIF, LC AS term, however, initial respond is rather weak.

A Vietnamese buyer commented, “This offer is way above market acceptance level at the moment. The trend appears to be softening with the availability of competitive re-export material from China that eased the recent supply tightness in Vietnam. We have purchased Saudi cargoes earlier today at $1130/ton CIF Vietnam.” On the other hand, the producer does not so eager to slash the prices to Southeast Asia claiming healthy sales in domestic India and better margins in Turkey market. “We might monitor further development before implementing any measures, since we are not facing any strong sales pressure.”

In spite of the availability of the re-export material, the revival of the propylene (C3) costs and the firm stance from several international producers is believed to limit room for further price reduction. Players are monitoring the respond from Chinese buyers toward firmer futures market for indication on whether to take position.

The regional PE market holds mostly stable after discounts reported on HDPE cargoes earlier this week. Regional players believed that market is heading for stabilization though demand is not bold, strong ethylene costs might provide some support. In domestic Indonesia, both HDPE and LLDPE supply is tightening on local production issues. In fact, Chandra Asti takes the HDPE unit off-stream this week for 15 days maintenance work. The plant is expected to remain shut until mid March.