Asia Daily PP and PE Overview 13 July 2017

In China, PP futures on Dalian Commodity Exchange continue to fall for the send straight session, shredding another CNY88/ton ($13/ton) to close at CNY8020/ton ($1011/ton without VAT). On the other hand, LLDPE futures added CNY50/ton ($7/ton) to reach CNY9135/ton ($1152/ton without VAT).

Transaction in domestic spot market diminishes as converters turned to be more conservative and most cargoes takers are arbitrage traders. “Yet, major local producer decided to withdraw offers for both PP and PE on the back of lacking sales pressure. There are discussions that second half of the month would possess firmer trend and we hope falling domestic inventory would support the movement.”

It is reported that total PP and PE inventories at major local producers’ warehouse has fallen another 6 per cent (or 40,000 tons) from last Thursday to approximate 600,000 tons, moving further down from the psychological benchmark. “And therefore we temporarily suspended offering homo-PP to Southeast Asia, hoping that domestic ground would offer better margins.” The source added that export offers for regular homo-PP would be at $1065/ton FOB China term, which is not attractive to overseas buyers.

In the import market, new offers for Qatar’s PE hold firm at $1090/ton for LLDPE film and $1140/ton for LDPE film, CFR China, LC AS term. There are little movement in import prices except the fact that offers at the lower end of the overall price range are no longer available. A trade received offers for HDPE film at $1130/ton for Thailand origin and at $1120/ton for Taiwanese origin, all based on CFR China, LC 90 days term. The source said, “Suppliers claimed not having cargoes and would implement additional hike tomorrow. Spot market is heavily influenced by futures sentiment and we prefer to monitor actual demand from converter.”

In Southeast Asia, the import homo-PP market remains active as Vietnamese and Indonesia buyers continue making replenishment. The number of transaction appears to be satisfactory though buyers are more selective when it comes to origins. A major Thailand producer sold 1200 tons of import homo-PP yarn to Vietnam in the previous session claimed to have sold additional 1000 tons today. A source close to the company added, “Converters are more willing to take larger quantity while traders are less aggressive. Many buyers are still asking for additional quantity and we are trying to allocate cargoes.”

Meanwhile, in Indonesia, buyers become more active in placing price inquiries and bids. Deals are still limited in Indonesia and the general accepted levels for dutiable cargoes are ranging $1050-1060/ton CIF Indonesia, LC AS term. There is a risk that offers for non-dutiable homo-PP might not be able to firm up in a desirable range as competitive local materials cap the uptrend. A local producer offers homo-PP yarn based on FD Indonesia, cash term at IDR15,100,000/ton ($1127/ton) without VAT. The source said, “We think market might follow stabilizing trend as surging propylene cost cushion prices. However, demand does not support any drastic hike. At the moment, Indonesian buyers still have the choice to source competitive cargoes from domestic suppliers.”

Southeast Asian buyers are discussing regarding the extent and the sustainability of the current firming trend. Most believed that any significant increment is not possible at the current demand condition.

The regional PE market is much calmer and buyers are not confident enough to make replenishment. A major domestic producer in Indonesia slashed HDPE and LLDPE film prices by $60-70/ton from official price list given earlier this week have caused massive concern in the distribution market. Many traders are unable to follow such knee-jerk move to protect profit margins. Another trader added, “These prices are lower than import offers from most Southeast Asian origins. Our customers are asking for similar levels and we could not meet such request to protect margins. Such move could depict a lower-for-longer market trend in domestic ground and this is very alarming to traders.”

Vietnamese buyers are also very cautious about new purchases and placing bids at very low levels for import materials. A trader offer Iranian HDPE film said, “Buyers are asking for $1020/ton CIF Vietnam levels. We are not having large quantity on hand, hence we are unable to meet such low bids.” It appears that import PE market to Southeast Asia is still struggling to draw out the direction.