Asia Daily PP and PE Overview 27 June 2017

In China, futures market extended the firming trend for the second session in a row. September delivery contract for PP added CNY56/ton ($8/ton) from yesterday to reach CNY7777/ton ($972/ton without VAT). LLDPE contract meanwhile, gained CNY90/ton ($13/ton) to close at CNY8880/ton ($1110/ton without VAT).

Domestic spot market sees some small movement as buyers in the BOPP sheet sector returned to make replenishment. Yet, offers from local producers for both PP and PE remains largely unchanged from the previous session while distribution market is endeavoring small discount to encourage purchases. A BOPP sheet converter reported to have received new order for end product of 800 tons said, “We are not in rush to buy extra quantity as it seems local supply is still comfortable. We hope new orders would continue to come in.” Meanwhile, woven bags sector is now in mid of off-peak season.

Sales for LLDPE film in local China market is relatively healthier than other grades due to limited availability. “We can’t move too large quantity, however our customers are off-taking enough to cover the immediately need. Buying interest would improve further if the recent rebound in futures trading prove to be sustainable,” a trader commented.

There are still very limited trading activities in Southeast Asia region as most Malaysian and Indonesian buyers are still away from their desks. It appears that major Middle Eastern suppliers are not willing to give too large discount on PE cargoes, from which Vietnamese buyers started to consider their purchases at $1080/ton mark for LLDPE film.

An international trader said, “Our principal supplier decided to hold firm on LLDPE film cargoes after the adjustment announced late last week, yet our customers are still asking for $10/ton discount on HDPE cargoes to $1070/ton CIF term. Market is still slow and we hope the condition would improve in the near term.” Until this moment, there are still no mainstream PE film cargoes concluded below the $1080/ton mark in Vietnam.

Meanwhile, several converters in Malaysia are returning to the market with rather calm tempo, not rushing to make replenishment claiming comfortable stock. A flexible packaging converter informed, “We have completed all Ramadan orders for end products and currently waiting for new businesses. We are still having some import LLDPE film cargoes arriving soon and might make fresh replenishment in July if our supplier agree to reasonable discount.”

In the PP market, many diverged factors are emerging that create confusion among buyers. Propylene costs remain relatively firm amid tightened supply stemming from several major shutdown in Asia, however, Philippines homo-PP traded at surprising drop in Vietnam today. There is an approximate 600 tons of this material sold to Vietnamese customers at $1040/ton CIF Vietnam, LC AS term, which is very competitive for non-dutiable cargo. A converter said, “Many other dutiable cargoes are offered at higher level than this, therefore we decided to purchase the Philippines cargoes. This might pressure other suppliers to step back on their prices in the near term.”

In fact, an international trader decided to reduce bid levels to $1030/ton for Saudi Arabia homo-PP right after news about the deals spread, causing buyers to rethink about the possible come back of PP market.