Asia Daily PP and PE Overview 29 June 2017

In China, futures marker rebounded towards the end of the week, adding three digits in value and erased most of the losses recorded in the past sessions. September delivery contract for PP jumped CNY123/ton ($18/ton) to close at CNY7873/ton ($992/ton without VAT). LLDPE contract leap CNY130/ton ($19/ton) to reach CNY8975/ton ($1131/ton without VAT).

Players reported better number of deals in domestic spot market for PP as arbitrage takers leverage the larger homo-PP prices gap between spot and futures trading. There is generally better sentiment and near term outlook expectation amongst market participants on the belief that prices are nearing the bottom now. A trader said, “We received good number of inquiries for LDPE coating and film this week and we think this trend might persist in the coming week. In term prices, we are not expecting any significant movement with the traditional high demand season is still at the horizon.”

Domestic LDPE film based on EXW China, excluding VAT, cash term showed signs of stabilization for two weeks in a row on tightening availability after a prolong period of falling. Chinese players are hoping that firmer local prices would elevate offers from international sellers.

Meanwhile, Indian supplier has accepted bids at $960-970/ton CFR China for HDPE injection cargoes. Several deals are seen, mostly at small to medium quantity. It appears that Iranian HDPE film cargoes are no longer standing at the lower end of the overall price range despite tremendous issues with payment term, instead, most Brazil and USA materials are forming the floor prices at the moment. A trader sold Iran HDPE film (7000F grade) at $1090/ton CFR China, TT in advance term, up $5/ton from last week said, “Supply from Thailand is tight and we think the influx of USA cargoes might be curtailed in the coming month due to hurricane season that might affect production here.”

In Southeast Asia, purchasing activities in Vietnam improved visibly for PE after major Saudi Arabia producer conceded to the second downward adjustment of $10/ton from initial offers, bring latest prices for both HDPE and LLDPE film to $1070/ton CIF Vietnam, LC AS term. A trader reportedly sold more than 2500 tons of this cargo at the latest price said, “Our customers immediately accepted the latest offers after initial resistance. We are requesting the principal supplier for another 1000 tons as several other buyers are still asking for material.”

Many Vietnamese buyers believed that market has reached the bottom as import LLDPE film prices below the $1100/ton mark have not repeated in several years. “We think prices are good enough and we have made some purchases before buyers return from Ramadan celebration to make post holiday replenishment. Besides, we think the upstream market is supporting the general trend.”

Meanwhile, in local Malaysia, a major domestic producer cut local prices by approximate $28/ton for all PP and HDPE cargoes, $58/ton for LDPE and $23/ton for LLDPE film from last month. A packaging converter said, “Sentiment is still low after the holidays but we do plan to restock some cargoes for second half of the year. Export orders for our end products are stable.”

In related plant news, Thailand’s SCG unexpectedly shutdown its number 4 HDPE unit on 28 June 2017 due to technical glitches. The 400,000 tons/year unit, which produce mainly HDPE film and blow molding grades might need up to two weeks to come back to normal operation. July and August export allocation from the maker might be affected.

The regional PP market remains mixed and players are putting strong hope on post-holiday replenishment from Indonesia. Fewer buyers raise expectation for further price reduction though the price gap between dutiable and non-dutiable cargoes in Vietnam is getting narrower. “It is still uncertain about the near term outlook and market might have to wait for Middle Eastern suppliers to resume offering before can gauge the like direction.” There are very limited number of new offers observed this week.