Asia Daily PP and PE Overview 08 Mar 2017

In China, futures prices on Dalian Commodity Exchange surprisingly made a nosedived on the third session of the week. PP contract for May delivery fell CNY344/ton ($50/ton) to reach CNY8316/ton ($1030/ton without VAT). LLDPE contract on the other hand slipped CNY350/ton ($51/ton) to close at CNY9305/ton ($1153/ton without VAT).

The drastic movement on Dalian Commodity Exchange surprised many market players as the earlier gains have strengthened expectation of prices nearing the bottom. “At the moment, we are not sure on how much more room market has for further reduction. Outlook is becoming very cloudy,” a trader commented. Blamed for the bearish prospect is still on high inventories, lack of cash low and weak end product businesses. There are still deals reported in the local ground, focus mainly on homo-PP and LLDPE film at prices mostly around the lower end of the overall range. However, buyers are not aggressive enough to ease the current lengthy supply condition.

In the import ground, while large scale converters are showing interest in replenishing deep-seas homo-PP for late April to early May arrival, domestic producer are keener to export locally produced cargoes. In fact, several deals for Middle Eastern homo-PP are reported at the range $1100-1110/ton CFR China, LC AS term today. A trader said, “We only managed to conclude a small deal after some discount as buyers are not very active yet. We have been trying to maintain our offers above the $1100/ton threshold for couple of weeks and have no intention to breach below the mark. We hope to see better demand in the near term.”

On the other hand, USA’s HDPE blow molding offered at $1070/ton CFR China, LC 90 days term, is expected to put the stabilizing trend on check. A trader added, “This offer is about $20-30/ton lower than last week. It is becoming challenging for import material to attract buying interest as local prices continue to journey south. We do hope that demand could be better by month end.”    

In Southeast Asia, players who were hoping for a stabilising trend in both PP and PE market might find disappointment as several suppliers continue to down adjust their offers to the region. Chinese homo-PP offers to Vietnam formed the new low in the market, touching 1060-1070/ton CIF Vietnam, LC AS term which might extend its downward pressure on the dutiable cargoes. A Chinese supplier commented, “Supply in local China market remain high and we might need to export additional cargoes in the near term. We hope to attract some buying interest with our offers since demand in Vietnam has been declining recently.”

The weakness observed in the import ground has also affected domestic market in Vietnam as trader slashed prices to facilitate sales. Local homo-PP offers currently stand at VND29,400,000-29,600,000/ton ($1170-1180/ton without VAT) FD Vietnam, cash term. A trader commented, “It is a little slow in local ground. With the new low formed by non-dutiable Chinese cargoes, we are not very confident that market is stabilising, in contrary, more discount might emerge in the near term.”

In the PE sector, prices at the upper end of the over range are facing strong resistance and more suppliers are stepping back on their offers. In fact, it is reported that a major Saudi Arabia producer offered $20/ton reduction on HDPE film cargoes from initial March shipment prices, to reach $1210/ton CIF Southeast Asia, LC AS term. “We expected further cut in the near term as other Middle Eastern supplier has already concluded HDPE film cargoes to Indonesia at $1170/ton in the previous week. We were hoping that tight supply from international suppliers could hold the market from further deterioration, however, another possibility might take place.” Many other regional players have also revised their price expectation downward for the coming week as demand across Asia see little improvement.    

Within Indonesia, traders have also slashed their HDPE film offers by IDR300,000/ton ($22/ton) week on week basis reaching IDR16,500,000/ton ($1235/ton) FD Indonesia, cash term. A trader added, “Local PE supply is rather tight due to the on going production issues. However, demand is really weak even with the preparation for Ramadan season is around the corner. We are not very confident about the near term outlook.”