Asia Daily PP and PE Overview 15 June 2017

In China, futures market continues to settle at lower levels today, market three consecutive falling sessions. September delivery contract for PP inched another CNY78/ton ($11/ton) lower to reach CNY7630/ton ($959/ton without VAT). LLDPE contract loss another CNY120/ton ($18/ton) to reach CNY8835/ton ($1110/ton without VAT).

The heat in the domestic spot market observed in earlier days is gradually cool down toward the weekend. Traders, including those active in doing arbitrage are not active in replenishing cargoes and in fact with softer futures trades, there are discount of CNY50-100/ton ($7-15/ton) reported on both PP and PE. “Converters have purchased sufficiently and currently wait and see while there is no opportunity to direct cargoes to Dalian Commodity Exchange at the moment. Market loose its steam again,” a trader commented.

In the import PE market, many buyers have expressed the intention to make replenishment with one condition that prices for deep-seas cargoes must stand at three digits. There are couples of deals for Iranian HDPE and LLDPE film reported at $980/ton CFR China, TT in advance term; however this is still not the main trend in the market.

Comparing import Saudi Arabia’s LLDPE film to China and Vietnam, there is technically no location gap at the moment. Based on netback calculation, it would make more economic sense to sell in China, yet deals are fewer than expected here.

In Southeast Asia, market is getting calmer with only suppliers in domestic Indonesia are enthusiastic about lifting local prices on tightening supply. In the import ground, suppliers are offering additional discount to stimulate cargoes off-take. It appears that more deals for import HDPE and LLDPE film to Vietnam are closed below the $1100/ton threshold toward the end of the week.

In international trader sold Kuwait LLDPE film at $1095/ton CIF Vietnam, LC 90 days term said, “We only have 100 tons material arriving soon, hence agreed to conclude at this term. Buying interest is not very strong while other suppliers, including South Korea, Thailand and Australia are even more aggressive this week. We think that the near term outlook for PE market is rather cloudy.”

Meanwhile, domestic traders in Indonesia implemented IDR200,000/ton ($15/ton) compared to earlier this week to reach IDR15,000,000/ton ($1127/ton) without VAT, FD Indonesia, cash term. A market source informed, “Domestic supply for HDPE film is tightening due to some production issues. We have replenished sufficient material till early August, hence might wait and see on the side line for the remaining of June.” This has spurred concern that replenishment activities right after the Eid al-Fitr holiday might be weaker than expected.

Other than Indonesia, most other local markets within the region including Thailand, Malaysian and Vietnam are facing sluggish demand condition. Domestic traders in these markets are complaining about difficulties they face in maintaining prices and some have started to offer discount.

The regional PP market seem to be loosing ground with traders are collecting bids for Philippines homo-PP to Vietnam at additional $20/ton discount from yesterday. “Our supplier is asking about our interest on Philippines homo-PP at $1050/ton though it is still depending on the producer to make final decision on the prices. We are considering at the moment as it seem this level is very competitive for non-dutiable cargoes.”

With the absence of most Middle Eastern PP suppliers this week, buyers are not showing any panic as Asian materials are still available at relatively competitive levels.