Asia Daily PP and PE Overview 6 July 2017

In China, futures market rebounded in moderate range, ending the two consecutive sessions of falling. PP contract for September delivery jumped CNY146/ton ($21/ton) to reach CNY8014/ton ($1007/ton without VAT. LLDPE contract gained CNY95/ton ($14/ton) to close at CNY8955/ton ($1126/ton without VAT).

Trading activities in domestic spot market remain mediocre and traders are complaining about difficulties in lifting prices. However, players shared a mutual expectation that prices might not witness any significant swing in the near term. “Total inventories at local producers’ warehouses has fallen to average mark, indicating the lack of sales pressure. We expect demand for homo-PP to pick up in August, but hold conservative stance for this month,” a trader commented.

As reported earlier, several PP plants in China have either reduced operating rate due to lack of propylene supply or switch to producing copolymers grades in an effort to bring homo-PP supply to meet demand. According to the latest data, homo-PP production compared to late June has decreased 3% while PP copolymer production increased 5%. Another market source added, “Together with reduced import arrival, we think PP market might have stronger outlook than LLDPE.”

In the import market, the firm trend observed in the PE sector earlier this week is now loosing momentum. Several major traders elected to cut prices or forward selling cargoes for October arrival at lower levels, in combat with lethargic buying interest. A trader sold Iranian HDPE film (7000F) at $1075/ton CFR China, TT in advance term said, “We agreed to $10/ton discount after initial attempt to hold firm. The PE market might face stronger pressure toward quarter 4 with more USA cargoes coming, together with Iranian and Indian material.”

In Southeast Asia, import PP market started showing clearer signs of the direction in the near term with most indication pointing to a more stable condition. Regional players are pointing to factors such as tightening availability of Middle Eastern cargoes and reduced pressure among Chinese suppliers to be the main support.

Several Saudi Arabia makers decided to divert their cargoes to other markets in recent weeks, in bid to obtain healthier margins, causing concern among Vietnamese buyers. An international trader informed, “We only have a small quantity of Saudi homo-PP injection to offer at $‎1040-1050/ton CIF Vietnam this week; yarn grade has been sold all to India.” Another trader selling same cargoes also claimed to have no quantity to offer to Vietnam this week.

Earlier this week, a Saudi Arabia producer decided to divert their cargoes to South Africa, Turkey and India as Southeast Asian buyers are placing bids are well below offer levels, “Demand in India is diminishing because of the implementation of the GST, however, due to tight supply stemming from a shutdown at one of the major local producer, buyers here are still accepting higher prices.” In fact, Indian buyers informed that import dutiable cargoes could fetch prices in the range $‎1090-1100/ton CIF India, LC 0-90 days term.

In contrast, import LLDPE film is now under high-risk category, according to Vietnamese players. This is due to the presence of low price Indian materials, rocking buyers confident in the near term outlook. “Import offers for Indian LLDPE film lower than homo-PP at the moment and we are very concern about the market condition. We might postpone purchases to monitor development.” The source reported to have received offers for Kuwait LLDPE film at $1075-1080/ton CIF Vietnam, LC AS term.

Meanwhile, another PE producer in Malaysia announced local prices with MYR100-250/ton ($24-59/ton) reduction on all PE film grades following the trend in the international market. “Local prices are still high while the supplier is unable to fulfil the order promptly. We plan to negotiate with international sellers to replenish a small quantity only,” a buyer said.