Asia Daily PP and PE Overview 27 July 2017

In China, futures market makes a drastic down turn toward the end of the week. September delivery contract for PP plunged CNY130/ton ($19/ton) day on day to close at CNY8349/ton ($1060/ton without VAT). LLDPE contract slipped CNY60/ton ($9/ton) to reach CNY9550/ton ($1213/ton without VAT).

Domestic spot offers for both PP and PE drop for the first time in nearly two weeks, shredding approximate CNY50-100/ton ($7-15/ton) on muted trading activities. Arbitrage traders are making quick exit from the bear market, slashing prices and causing serious fear about the sustainability of the recent firming trend. “The number of deals drop significantly, however, we see converters are making replenishment at the lower end of the overall price range. Therefore, prices might not fall too steeply in the coming weeks,” a trader said.

In the import ground, Saudi Arabia maker reportedly withdraw offers for homo-PP yarn after achieved sales at $1070/ton CFR China, LC AS term in the previous session. An international trader offered on behalf of the producer added, “We managed to deplete the cargoes without much hurdle and at the moment, we are not considering any deal below the $1070/ton mark.”

In contrast, it appears that room for further increment in the import PE market is getting narrow now, that prices at the upper end of the overall price range are facing stiff resistance. Another market source said, “Saudi HDPE and LLDPE film priced at $1130-1140/ton CFR China can no longer attract that great buying interest seen earlier this week. Buyers have replenished sufficient material and now adopt wait and see stance.”

In Southeast Asia, couples of international suppliers have closed orders for August shipment with very small discount compared to initial offer levels. However, buyers are not aggressively making replenishment, especially for PE, claiming persistent sluggish condition in local ground.

A Vietnamese buyer purchased Saudi materials at $1100/ton for HDPE film and $1120/ton for LLDPE film, all based on CIF, LC AS term, which is only $10/ton discount. The source said, “We only take a small quantity as we have comfortable stock on hand. Prices are too high and we hope domestic market could catch up in the near term.”

Meanwhile, South Korean producer lifted PE offers by $40/ton compared to mid-July, bringing latest offers for HDPE and LLDPE film to $1150/ton CIF Vietnam, LC AS term. Vietnamese buyers are not ready to accept such rapid hike and therefore a certain degree of resistance shown up, however, the maker prefer to hold firm stance, refusing any price negotiation. A local buyer commented, “The producer is very firm on the cargoes, hence we switch to source some Thailand cargoes, which are priced at much more competitive levels. We think the market is lacking of strong push to increase any further, hence we prefer to be cautious.”

Meanwhile, in the latest development in the PP market, Singapore’s Noble Group is now undergoing major organizational restructuring, from which a number of cargoes the company sold previously are now facing indefinite delay in shipping, said the company’s announcement to customers. A BOPP sheet maker in Vietnam informed, “We were advised to cancel the order of few hundred tons and this might be an issue for us since we are running low on inventories.” This is expected to worsen the supply condition on an accumulative level.

At the meantime, purchasing activities in local Indonesia market remain hot and the recent tightened import cargoes clearance regulations hampered the material circulation. Many buyers become concern over the near term market outlook and considering to take longer stock than usual. A converter said, “Local traders are not willing to give any discount due to low sales pressure. Prices might continue to climb and we are considering to buy material for October production.”