Asia Daily PP and PE Overview 16 May 2017

In China, futures prices on Dalian Commodity Exchange increased for the second session in a row, reflecting the impact of stronger energy market and bright prospect of the One Belt One Road trade initiative. September delivery contract for PP gained CNY164/ton ($24/ton) to close at CNY7793/ton ($965/ton without VAT). LLDPE contract also jumped CNY220/ton ($32/ton) to reach CNY9150/ton ($1133/ton without VAT).

Domestic market remains resilient with good number of deals concluded for both PP and PE, though it appears that LLDPE catches greater attention. This is due to the fact that arbitrage traders are leveraging the price gap of CNY200/ton ($29/ton) between spot and futures trading for LLDPE film. Meeting with a Shanghai based trader during ChinaPlas, the source informed, “We are surprised with the market as we were initially expecting slower demand this week due to the exhibition. The number of deals concluded this week is satisfactory, just one factor we are concerning about is that most cargoes takers are still traders. Hence, possibly that if futures market witness downturn in the coming days, spot trading activities might loose steam.”

There is little movement observed in the import ground and new offers for homo-PP are especially limited. Meanwhile, import USA HDPE blow moulding to China continue to soften by $20-30/ton week on week basis, reaching $1000/ton CFR China term. A buyer placed bid for the cargoes at $980/ton with the same term said, “This cargo would only arrive in August. At the moment, we are monitoring development in Southeast Asia for potential arbitrage opportunity.” Players also reported that many Chinese converters are either in the process of moving factories to other area, where environmental regulations are less strict or upgrading waste disposal system in compliance with government’s requirement. As a result, buying interest from converters might temporary remain in the current condition.    

In Southeast Asia, buying interest for homo-PP among Vietnamese buyers seems to pick up as major Thailand producer managed to conclude a good quantity of material after cutting prices by $15/ton week on week basis. The maker reported to have sold approximate 2300 tons of homo-PP yarn to Vietnam today at $1055/ton CIF, LC AS term. Source close to the producer informed, “We have temporarily suspended our offers though many customers are still sending in purchase inquiries. At the moment, we only have left HDPE and PP block copolymer to offer.”

Many Vietnamese buyers believed that import homo-PP to the country is nearing the bottom, which encourages converters to make purchases. Several deals for Singaporean homo-PP yarn are reported at $1060/ton with the same term today. A household product manufacturer said, “We have stocked up two months worth of inventories by now. We might purchase additional quantity in the coming weeks if prices drop further.”

In contrast, Indonesian buyers are not very confident that the bottom is near as persistent weak demand continues to dampen the general sentiment. A buyer received homo-PP offers at $1090/ton for Philippines origin and $1055/ton for Saudi origin, CIF Indonesia, LC AS term said, “If pre-Ramadan replenishment activities are this weak, we are not confident about the post-Ramadan demand condition. At the moment, market has yet to see a strong factor that could push prices up, hence we prefer to only procure material based on need basis.”

The PE sector is rather mixed. Several international suppliers are attempting to lift HDPE offers to Vietnam by $10-20/ton with aim to test market respond. Latest offers for Kuwait HDPE film indicated $10/ton increased compared to earlier this week while Iranian HDPE film jumped $20/ton to reach $1140/ton CIF Vietnam, LC AS term. An international trader said, “However, buyers are resisting very strongly towards the new prices, signaling the lack of fundamental support for firmer trend despite strong energy and ethylene costs.”

A major Malaysian producer has also announced fresh PE offers to Vietnam with $30-40/ton reduction from last month, reaching $1140/ton for HDPE film and $1330/ton for LDPE film, all based on CIF Vietnam, LC AS term. Regular buyers are planning to make replenishment after skipping purchases in the previous month.