Asia Daily PP and PE Overview 3 July 2017

In China, futures market continues to firm up, pushing the general market sentiment. September delivery contract for PP jumped CNY106/ton ($16/ton) to close at CNY7979/ton ($1004/ton without VAT). LLDPE contract closed CNY45/ton ($7/ton) higher, reaching CNY9030/ton ($1137/ton without VAT).

Trading activities in domestic spot market is stable. Traders attempted to lift prices by CNY50-100/ton ($7-15/ton) from last Friday, yet deals are reported with discount. “Most cargoes takers are arbitrage traders, hence concluded prices are about CNY200/ton ($29/ton) below futures market levels. Manufacturers are very steady in their replenishment given comfortable supply in local market, especially for homo-PP.”

On the other hand, supply for LDPE film and heavy duty grades remain tight, helping traders to achieve healthy margin reselling to domestic customers. A trader reported to have sold Iranian LDPE heavy duty at CNY9800/ton ($1234/ton without VAT), EXW China, cash term said, “We made a profit of CNY800/ton ($118/ton) on these cargoes. We expect local LDPE heavy duty prices below the CNY10000/ton ($1257/ton without VAT) mark to disappear soon.” Demand for LDPE comes earlier than expected thanks to tightened supply. However, the sustainability of the trend remains in question.

In the import market, players again feel the pressure as Iranian material re-emerge at very competitive levels. A deal for Iranian HDPE injection and LLDPE film is reported at $955-965/ton CFR China, TT in advance term with a buyer in Ningbo said, “We think these prices are very good at the moment, therefore we decided to procure the cargoes.”

In Southeast Asia, the general sentiment is rather calm on the first trading day of the week. Many buyers within the region reportedly asking for offers, yet transaction are rather limited. With additional fall in ethylene costs, players again suspend purchases temporarily to monitor further development.

In fact, ethylene based on CFR Southeast Asia fell $30/ton on last Friday to $850/ton – the lowest level seen since 23 September 2015. “This enlarged the price gap between ethylene and PE, leading to a wide spread expectation that there is still room for further reduction in the near term,” a trader commented. The source maintain offers for Middle Eastern LLDPE film at $1090/ton CIF Vietnam, LC AS term and has not been able to conclude any deals today.

Another Vietnamese buyer added, “Most suppliers are holding firm on Middle Eastern LLDPE film cargoes at $1090/ton and HDPE at $1070-1080/ton CIF term, however we are not planning to make any replenishment within these few days concerning the near term outlook amid weak demand across Southeast Asia and falling upstream costs.”

This condition is confirmed by a major Saudi Arabia producer, who maintained PE prices at $1080/ton for HDPE film and $1090/ton for LLDPE film, CIF Indonesia, LC AS term. A source close to the producer said, “Indonesia market is quiet and with latest price cut from major local producer, we are facing pressure. We are attempting to divert some quantity to Africa and Turkey, where margins is still better.” The producer is also facing difficulties to sell homo-PP to Thailand at $1040/ton CIF term.

In fact, two weeks since Indonesian buyers took off for the Ramadan holidays, many are still not back to their desks. The general market sentiment in local ground is rather sluggish with major domestic producer opens new price list for both PP and PE with reduction from mid-June. Indonesian buyers are mostly looking at the stable to softer trend in the near term pointing to the lack of support from both upstream and down stream markets. “We are able to obtain some discount on homo-PP in the distribution market for cash payment term. We are not expecting any significant swing in prices since market is amid off-peak season for homo-PP yarn,” a buyer said.

Meanwhile, in Vietnam, a Korean producer step back on homo-PP offers to the country by $20/ton week on week basis, brining latest offers to $1070/ton CIF Vietnam, LC AS term. A Singaporean producer is also collecting bids for import homo-PP to Vietnam with a buyer commented, “We are not confident in placing any bid at the moment. Local market is very weak.”