Asia Daily PP and PE Overview 21 Mar 2017

In China, futures market hold firm with May delivery contract settled higher for both PP and LLDPE. In fact, PP futures revived from yesterday loses to close at CNY27/ton ($4/ton higher) to reach CNY8269/ton ($1023/ton without VAT). LLDPE futures continued to gain another CNY65/ton ($9/ton) to reach CNY9400/ton ($1163/ton without VAT).

Domestic spot market remains healthy with a good number of deals reported. Suppliers are keeping PP offers unchanged from the previous trading day while implemented another CNY100/ton ($14/ton) hike on PE amid improving buying interest among agriculture film makers in Northeast and Northwest area. With reviving buying interest in local market over the past one week, it is reported that total domestic PP and PE inventories at major producer’s warehouses have shrunk to below the psychological threshold of 1 million ton this week and might continue to drop in the coming days.

A trader commented, “Many domestic traders managed to deplete on hand cargoes and now returning to make replenishment. We believed that demand would remain steady this week. However, in order to reduce the general inventories level further, prices must not increase too significantly.”

In the import market, an Indian producer down adjusted homo-PP offers by $15-25/ton from last week to conclude deal at $1035/ton CFR China, LC 30 days term. A trader purchased the cargoes commented, “This offer is apparently more competitive than Middle Eastern origin. The downward pressure is still presence, yet market might short of material in the coming months due to lack of import arrival, therefore, we decided to procure this cargo.”

Meanwhile, import HDPE blow moulding to the country priced below the $1100/ton mark is having good deals. Prices at the upper end of the overall price range in contrast, are facing stiff resistance. Similar situation is observed in the LDPE film market as a Thai producer slashed offers by $20/ton from last week reaching $1260/ton CFR China with a buyer said, “The LDPE film market shall also pick up as the current import prices are regaining competitiveness over domestic cargoes.”      

In Southeast Asia, the PP market is especially quiet in the absence of new offers from international suppliers. However, continued falling propylene costs are dampening buyer confidence and hope for stabilizing trend might fade. A major Southeast Asian producer slashed homo-PP offers by $60/ton from last month to reach $1220/ton CIF Indonesia, LC AS term today. Market is not responding very positively to the new prices claiming competitive offers levels in domestic ground with an Indonesian buyer commented, “This offer is similar with local prices at the moment. We think that import offers might continue to soften in the coming days, therefore we prefer to hold wait and see stance.”

Other regional and international suppliers are planning their new offers and it appears that sellers are no less pessimistic about the near term outlook despite the lack of inventory pressure. Couple of sellers have expressed their intention to cut homo-PP offers for April delivery to the region though no official prices announced.

In the regional PE market, most new offers emerged at lower levels; especially the pace of price reduction for HDPE film is accelerating. New offers from a Malaysian producer indicated $70-80/ton dropped from last month while import HDPE film from Middle East to Vietnam is mostly at below the $1200/ton threshold. Even LDPE film prices are softening on the back of plunging upstream costs and persistent weak buying interest across the region. A buyer received Malaysian LDPE film at $1370/ton CIF Vietnam said, “We are making huge loses as our cargoes purchased in previous month at $60/ton higher are arriving. Demand in domestic ground is rather weak and we concern that market outlook would remain bearish in the near term given falling offers in China and continued softening ethylene costs.”

Meanwhile, import LLDPE film to Vietnam breached below the $1200/ton threshold as traders stepped up effort to smoothen sales process, offering Middle Eastern cargoes at $1190/ton CIF Vietnam, LC AS term. A converter received the offer commented, “We did not proceed with purchases since our cargoes just arrived main port. Demand for our end product is a little slow and we might wait until next month before replenishing additional cargoes.”

In contrast, Indonesian PE market seems to have brighter prospect in the near term as several large-scale converters are getting ready for Ramadan orders, which are expected to come in early April. “However, there is not enough time to source deep-seas cargoes, hence we might concentrate on prompt parcels this time,” a food and beverage brand owner said.