Asia Daily PP and PE Overview 02 May 2017

In China, futures market opens the first trading day after the holiday with little movement. September delivery contract for PP only weakened CNY3/ton ($0.4/ton) from last week, reaching CNY7833/ton ($970/ton without VAT). LLDPE contract remain on the positive side, adding CNY55/ton ($8/ton) to close at CNY8880/ton ($1100/ton without VAT). However, the number of transaction for both contracts drop notably today.

Trading activities in local market remain mediocre, however, firm futures ground supported the general sentiment, encouraged traders to lift spot PP and PE prices by CNY50/ton ($7/to) from last week. Players in the country appear to be cautious and many prefer to wait for clearer indication on possible market trend before making decision.

“Market still lack of solid support to rebound in the near term, even with firmer ethylene costs, we are not seeing strong buying interest. Converters are having very low inventories on hand, yet very conservative about making replenishment. We expect more of a stable trend in the near term,” a market source said.

In the import market, a major Middle Eastern supplier cut import homo-PP prices by $30/ton from last week to reach $970/ton CFR China, LC AS term. Chinese buyers seem to have accepted prices at this level with a source said, “Though this price is just at the same range as local material at the moment, we think it is acceptable since we export most of our end products. Business is a little slow these couple of months, however we do hope to see better condition in the near term. At the meantime, we have no plan to make large purchases.”

China export of PP in March hit multi months high, reaching nearly 40,000 tons, which is up by 63 per cent from February, according to latest Custom Data. Though there is no official export data for April yet, Chinese players are expecting similar figure as of March. Regional players therefore are questioning if this could be the norm this year, especially when more coal based plants have achieved stable production rate.

In Southeast Asia, market resumed working after a long weekend holiday on a soft note though Vietnamese buyers are still not back to their desks. A major Saudi Arabia producer cut homo-PP offers to Indonesia by $20/ton from last week to reach $1050/ton CIF Indonesia, LC AS term today. Several deals are reported at this levels as the maker refused to concede to any additional discount. A buyer said, “We placed bid at $1030/ton but the supplier rejected, therefore we proceed with a small replenishment at $1050/ton. Overseas sellers are attempting to limit the range of price reduction, yet we think market still has room to move lower.”

Demand in local Indonesia market is still slow with sources pointed to the fact that end product buyers are delaying to place new order, causing a general sluggish condition along the supply chain. “Local materials are still very competitive at the moment and we think overseas suppliers must match the recent reduction in domestic ground in order to entice sales,” an Indonesian buyer said.

In fact, a major domestic producer announced fresh weekly prices with another $10/ton reduction on homo-PP and $30/ton cut on LLDPE film and HDPE cargoes in spite of tight availability of LLDPE film due to the recent production issues. A trader active in selling imported material said, “We might need to match the cut though our profit margin is squeezed. We are not having much cargoes on hand as well.”

In Malaysia, a local producer has also opened fresh offers for May delivery cargoes with MYR100/ton ($23/ton) decreased month on month basis for both PP and PE, yet the buying momentum is somehow not picking up. A HDPE bags converter said, “We have made sufficient purchases last month and currently just wait for our cargoes to be delivered. The recent ban on plastics bags across Selangor region really hurt domestic businesses while our export activities remain relatively stable. Local supply is also tight, however, slower demand has balanced it up.”

In the PE sector, a Saudi Arabia producer offered additional $10/ton discount from final concluded prices last week on LLDPE film cargoes to Vietnam, bringing latest prices to $1150/ton CIF Vietnam, LC AS term. A distributor said, “We have sold out HDPE cargoes and the remaining quantity for LLDPE film is not too high and we would adjust the contract for those customers whom have concluded at higher level last week. Most Vietnamese buyers are still on holidays, hence we are not expecting healthy trading activities this week.”

Other Middle Eastern producer have also reduced PE offers to Indonesia by $15-25/ton month on month basis, reaching $1175/ton for LLDPE film and $1275/ton for LDPE film, CIF Indonesia, LC AS term.