Asia Daily PP and PE Overview 23 Mar 2017

In China, futures market regained some losses from the previous session with May delivery contract settled at CNY42/ton ($6/ton) higher for PP, reaching CNY8171/ton ($1014/ton without VAT). LLDPE contract also increased CNY95/ton ($14/ton) at CNY9345/ton ($1159/ton without VAT).

Domestic spot market remained very steady and the number of deals concluded has not dropped despite the fluctuation of futures market. Sellers maintain offers for PP and PE mostly stable, except LDPE film again added another CNY50-100/ton ($7-15/ton) from yesterday due to better demand than other grades.

A producer in Ningxia informed of satisfactory sales for both coal-based homo-PP and LLDPE film said, “It is a positive sign that demand for coal based materials pick up, which underline brighter market prospect in the near term. Buying interest from agriculture film manufacturer is improving and we believed that market would sustain the stable to firm trend for the remaining of the month.” However, in comparison, PE market might remain stronger than PP, Chinese players said citing the thin profit margin converters in the PP sector are facing, which could limit the extent of any large price increment.

There has been concern over the possibility of lacking Iranian HDPE and LDPE cargoes coming to China in the medium term amid payment term issues. Over the past month, tightening bank policies allowed Chinese buyers to only make payment to Iranian suppliers by telegraphic Transfer (TT) only and not by opening letter of credit (LC). “This is not very favorable to traders in term of cash flow, however, we have yet to see any impact on the traded volume recently. We do feel concern over the medium term supply, therefore we have purchased some Iranian LDPE film cargoes today even with $20/ton increased from last week, at $1250/ton CFR China term.”

In Southeast Asia, buyers across the region are very much holding the wait and see stance, hoping that suppliers would offer additional discount in the coming days as upstream continue to journey south. Suppliers on the other hand, are attempting to hold very firm stance on their cargoes, however, might loose grips amid persistent sluggish buying interest. An Indian producer offered homo-PP to Southeast Asia at $1120/ton CIF term said, “The best bid we received from Southeast Asian buyers is at $1090/ton with the same term. We are firm on our cargoes due to several shutdowns taking place at the moment, yet this might not be long lasting as other producers might pioneer price cut.” The source also reported to have sold 4000 tons of homo-PP cargoes to China at the levels $1035/ton CFR term.

In Vietnam, non-dutiable regular Chinese homo-PP yarn offered at $1090/ton CIF Vietnam with form E, deepening market expectation that dutiable cargoes are still having room for further reduction. In fact, many buyers in the country who have purchased Saudi Arabia cargoes previous week at $1080/ton CIF term are now expressing new buy idea at $1050/ton for the same cargoes. A converter commented, “Based on theoretical costs at the current propylene prices, we think there is still room for reduction. Therefore, we prefer to wait further.”

In the PE market, a Saudi Arabia producer announced fresh offers to Vietnam at stable to $10/ton increased from last month to reach $1210-1220/ton for LLDPE film and $1190/ton for HDPE film, all based on CIF Vietnam, LC AS term. A distributor offered on behalf of the producer reported, “Buyers are placing bid at $30-40/ton below the offer levels, however, it is very less likely that our principal supplier would accept as European market still yield better margins.”

“We would only purchase a small quantity to cover basic need if the supplier refused any considerable discount amid plunging ethylene costs. Domestic traders are selling LLDPE film below import offers, which could indicate that buying interest among traders might also be limited,” a buyer added.