Asia Daily PP and PE Overview 22 May 2017

In China, futures market concluded the first trading day on mixed note. PP contract for September delivery added another CNY97/ton ($14/ton) from last week to close at CNY8092/ton ($1002/ton without VAT). LLDPE contract on the other hand slipped CNY30/ton ($4/ton) to close at CNY9295/ton ($1151/ton without VAT).

Trading activities in local spot market remain healthy and it is reported that major domestic producers have already achieved target for the month, which means that need to reduce offers to entice demand is now smaller, even with futures trade loosing steam. A trader implemented CNY50-100/ton hike on both PP and PE cargoes informed, “Converters are less active today since it is just the beginning of the week. Except for LDPE film, we managed to conclude a good number of deals to traders.”

In fact, the supply-demand dynamic in Chinese LDPE market might alter in the near term with Zhongtian Hechuang and Jiangsu Sailboat started up two new LDPE lines with combined capacity of 670,000 tons/year. Both companies are reportedly performing pre-marketing for the new output at way below the CNY10,000/ton ($1238/ton without VAT) threshold at the moment, dampening buyer confident in restocking this grades. Players are expecting a significant increase in LDPE supply within China, which could heavily pressure prices.

In the import market, Iranian PE continues to be traded at very competitive levels even for cargoes at bonded warehouse. A trader purchased the cargoes at $1000/ton for LLDPE film and HDPE blow molding, TT in advance said, “It has been hard to buy Iranian materials these few months due to tightened bank regulations. And we think our suppliers wish to reduce inventories before the Ramadan, hence willing to give low prices. Other Middle Eastern suppliers have yet to announce new offers.”  

In Southeast Asia, there are very limited new offers observed in the market, especially for import homo-PP as suppliers just returned from couple of international events. Regional players still hold on to the belief that PP market has reached the bottom and prices might witness minor rebound in the near term on the support of stronger upstream costs and satisfactory sales registered in the previous week. A Vietnamese buyer commented, “We checked with several sources including Chinese coal based PP, however, most international suppliers have yet to announce new offers. In domestic market, prices firmed up slightly as sentiment in import market improve. We are watching out for further development.”

In contrast, domestic PP market in Indonesia continue to decline with major local producer slashed offers for homo-PP by approximate $20/ton from last week despite stabilizing import ground. A buyer received offers from distribution market at $1120/ton excluding VAT, FD Indonesia, cash term said, “We have not decided on fresh purchases as we think traders might match the latest cut introduced by domestic producer. Hence, we are still waiting on the sideline.”

The regional PE market is moving in diverged direction. Couple of traders decided to implement $10-20/ton increased on Middle Eastern PE cargoes to Vietnam on the first trading day of the week, bringing latest price list to $1150/ton for HDPE film and $1160-1170/ton for LLDPE film, CIF LC AS term. A trader said, “Buyers are not responding to our latest offers. Many are still adopting wait and see stance as the recent drop in ethylene costs dampened market confidence very badly. We are monitoring further development before deciding on the next step.”

Meanwhile, international producers are discussing about new offers for June delivery, though no concrete sell idea levels reported, most are looking at softer levels from May as an effect of the Ramadan season and also softer upstream ethylene costs. Therefore, traders might gain little support to increase prices at the moment.