Asia Daily PP and PE Overview 5 July 2017

In China, futures market regains some balance after steep drop in the previous session. September delivery contract for PP inched CNY4/ton ($0.6/ton) higher to close at CNY7849/ton ($987/ton without VAT). LLDPE contract on the other hand still shred CNY40/ton ($6/ton) to reach CNY8825/ton ($1109/ton without VAT).

Local suppliers continue to offer CNY50-100/ton ($7-14/ton) discount on PP and LLDPE film cargoes while buying interest among traders is especially weak. Converters are no less cautious about making large purchases with a BOPP sheet maker said, “Demand for our end product pick up slightly, however the traditional peak season would only start by second half of August. We attempted to lift our end product prices by CNY200-300/ton ($29-44/ton) and face strong resistance, hence we might only source raw material if prices are competitive.”

Import market sees little movement and there are signs that PE offers to China is stabilising. “At the meantime, we are not expecting any visible rebound with low priced Iranian and Indian cargoes weight down on the market,” a trader said. Comparing import LLDPE film to China, most Saudi Arabia cargoes are transacted with premium over Vietnam for the same origin. This is not usual which might required correction. Chinese players remain optimistic over the medium term outlook for PE as flexible packaging sector would enter the high demand season soon.

In Southeast Asia, the LLDPE film market in Vietnam is especially under pressure as Indian suppliers step up effort to deplete their cargoes by offering below the $1050/ton threshold, which sent a chill wave to the sentiment. Many buyers brought up the concern over the prospect of their purchases in the previous week at higher levels.

A buyer received the offer at $1040/ton CIF Vietnam, LC AS term said, “We are placing bids at $1020/ton and currently waiting for the supplier feedback. We were hoping that the import PE market has reached the bottom, however, with competitive Indian materials, prices might stay low for longer.”

India welcomes at least four new PE plants in 2016 and 2017, adding a total 2.68 million tons to the market. At the current consumption rate, the country has some extra quantity to export. “Local demand in India is hampered by the implementation of GST. Most traders are not willing to keep materials, instead, putting on full gear to deplete inventories, exacerbating the pressure on the market. We are attempting to divert some cargoes to South Africa too,” an Indian producer commented.

In contrast, a major Thailand producer reported to have received several orders for HDPE film from Vietnamese buyers after technical issues hit its number 4 HDPE line last week, causing supply disruption. Players therefore speculate that comfortable supply for LLDPE film might allow HDPE film to be traded at premium in the coming days.

The regional PP market is rather cloudy though there are discussions that prices might not witness any significant swing throughout July. Middle Eastern suppliers are not as active as Asian sellers in recent weeks in giving and adjusting offers, claiming lack of quantity available. Couple of Saudi Arabia producers informed that more cargoes are diverted to Turkey and South Africa, where margins is better. “Southeast Asian market is too competitive in recent month. We are having some quantity of Saudi homo-PP to offer to Vietnam and currently collecting firm bids among buyers. However, we might have to sell at slightly lower levels than last month.” The trader sold this cargoes in June at $1050-1055/ton CIF Vietnam, LC AS term.