Asia Daily PP and PE Overview 15 Mar 2017

In China, futures market remains on the recovery track for three days in a row with May delivery contract continue to inch higher. PP futures closed at CNY47/ton ($7/ton) higher than the previous trading day, reaching CNY8238/ton ($1019/ton without VAT) while LLDPE contract added CNY20/ton ($3/ton) at CNY9250/ton ($1144/ton without VAT).

Traders in domestic market extended their effort to increase spot offers for both PP and PE by CNY50-100/ton ($7-14/ton) while the number of deal reported remains satisfactory. “Except LDPE film prices continue to drop another CNY100/ton ($14/ton), other grades are seeing better demand. Most of our agriculture film manufacturing customers are unable to reach full operation rate due to lack of end product orders. Therefore, market might just hold steady at the current pace in the near term and any drastic movement in very unlikely.”

In the import market, a Middle Eastern producer slashed LDPE film offers by another $30-40/ton from last week to reach $1210-1220/ton CFR China, LC AS term. This price levels indicated a total drop of $130-140/ton month on month basis. Source from the producer blamed the persistent sluggish demand condition and pressure from domestic material for such rapid price deterioration. The source added, “However, we only cut offers to China while holding firm in other markets, including Southeast Asia. We started to have better supply at the moment, and if demand in China doesn’t pick up in the coming month, other market might be affected.”

In the PP sector, suppliers within the country are still more interested in exporting and re-exporting their cargoes to other markets for better margins despite some improvement in local ground. “Yet, it is uneconomical to re-direct parcels to Turkey and Europe at the moment due to high shipping costs. Our main focus are still on Asian and Indian Subcontinent markets,” a trader commented.

In Southeast Asia, market sees more discussion today in line with the emergence of fresh offers from couple international producers. In fact, a major Saudi Arabia producer announced fresh homo-PP offers to Southeast Asia with reduction from last month. Indonesian buyers reported to have received the new prices at $1145/ton CIF Indonesia, LC AS term, a drop of $45-55/ton month on month basis. Buyers here are expressing buy ideas at around $1100/ton level with the same term with a market source said, “We would only make a small purchase at this price level. It appears that market is still under downward pressure at the current energy and monomer values.”

In Vietnam, new offers from the same producer indicated $10/ton drop week on week basis and $80/ton drop month on month at $1120/ton CIF Vietnam, LC AS term. The most popular buy ideas collected amongst buyers are at $1080/ton with the same term. A trader said, “We are not confident enough to make any purchases this week though it does appear that prices are nearing to bottom. We might wait until next week before taking position. We expect China to remain weak for the remaining of the month amid tightening liquidity and high inventory level. From which, it is hard to price to rebound drastically.”

In addition, USA homo-PP cargoes re-export from China reported earlier this week are reported to have dealt at $1070-1080/ton CIF Vietnam, LC AS term today. This has encouraged even stronger expectation that market might still have some small room for further discount.

The regional PE market remains in the same position though more HDPE film suppliers are loosening the firm stance they kept over the past month. Vietnamese buyers reported receiving Southeast Asian HDPE film at $1180-1190/ton CIF, LC AS term with a buyer added, “Our supplier advised us to pick up three containers to obtain price at $1170/ton. However, we are having sufficient inventory on hand at the moment while end product business is slow.” Other PE grades offered to the country hold relatively firm.

Another international trader offered Indian HDPE film to Southeast Asia at $1150/ton CFR, LC AS term while open to negotiation. A trader source added, “We could offer a small discount to encourage buying interest. Demand across Asia is very weak at the moment.”