Asia Daily PP and PE Overview 12 June 2017

In China, futures market opens the new week with unexpected hike. PP contract for September delivery jumped CNY187/ton ($28/ton) to close at CNY7927/ton ($999/ton without VAT). LLDPE contract closed at CNY205/ton ($30/ton) higher at CNY9135/ton ($1152/ton without VAT).

Trading activities in domestic spot market is rather satisfactory though it is reported that the price gaps between futures and spot ground are not attractive enough for aggressive arbitrage movement. A trader from Beijing increased offers for local LLDPE film by CNY50/ton ($7/ton) said, “Converters are making small replenishment as futures market surge, however with CNY100/ton ($15/ton) hike, it is very tough to conclude deals. Despite the fact that LLDPE film supply is tight in local ground, large price increment would face stiff resistance.”

Sin early March, local homo-PP has been constantly traded below or on the same par with import cargoes, causing a visible drop in buying interest for imported materials. CommoPlast data showed that on an average, domestic homo-PP based on EXW China, cash term stood at about $974/ton excluding VAT last week, which is below theoretical prices at the current propylene costs, prompting market expectation that propylene costs might need to drop further in the near term.

Some high MI Indian HDPE injection cargoes are concluded in the import market today at $1040/ton CFR China term and more quantity from this origin would come by second half of the year as new plant start up in India. At the meantime, traders are attempting to increase Saudi LLDPE film prices by $10-20/ton from last week to $1110-1115/ton CFR China, LC 90 days term following improved demand in local ground. No deals are observed at the latest offers.     

In Southeast Asia, the general market sentiment remains mostly calm on the first trading day of the week with buyers waiting on the side-line as upstream market extended the weakening trend. Both ethylene and propylene fell to multi month low levels on persistent sluggish demand from downstream markets

In fact, ethylene based on CFR Northeast Asia has lost about $270/ton since beginning of May 2017 and industry participants are expecting to see the bottom soon. Buyers in the downstream PE market on the other hand, continue to pressure sellers for prices below the $1100/ton threshold. A Vietnamese buyer received offers for South Korea LLDPE film at $1130/ton CIF, LC AS term said, “We are asking for $40/ton discount on deals and our supplier is considering. Domestic supply for LLDPE film is rather comfortable while demand might only pick up in late July. Therefore, we are very cautious about fresh replenishment.” Other traders are collecting buy ideas for Saudi’s LLDPE film and buyers in the country are hoping to obtain the cargoes at the price range $1050-1080/ton CIF, LC AS term.

Meanwhile, major local producers in Indonesia announced fresh weekly prices with $10-20/ton reduction for PE cargoes amid calm trading activities. Indonesian buyers might start going off for Ramadan holiday next week, however, there is a strong hope for better demand in the post holiday term.

In related news, Chandra Asri is forced to lower operating rate at its cracker to around 75% after a fire broke out at one of the gas pipelines last Saturday. The cracker is able to produce 860,000 tons/year of ethylene, 470,000 tons/year of propylene and 100,000 tons/year of butadiene. Other downstream units are not affected by the incident. It might take Chandra Asri up to a week to come back to regular run rate, market sources said.

In the PP market, Chinese suppliers lifted offers for coal based homo-PP yarn to Vietnam by $10-20/ton week on week basis, reaching $1070-1090/ton CIF Vietnam, LC AS term. Sources are pointing to stronger futures trading and healthier demand in local China market as the main driver behind such prices decision. However, Vietnamese buyers are not very responsive toward to new price levels claiming low upstream costs and weak demand. A converter said, “We are concern about the sustainability of this firmer trend, therefore we prefer to take cautious stance.”

Saudi Arabia supplier lifted import homo-PP prices to Vietnam and Indonesia late last week offered to conclude deal at unchanged levels $1060-1065/ton CIF, LC AS term. “Yet, our customers keep pressing for prices below the $1050/ton threshold,” an international distributor in Indonesia said.