Asia Daily PP and PE Overview 17 August 2017

In China, futures market surged considerably for the first time since January 2018 delivery contract started a week ago. PP futures jumped CNY272/ton ($41/ton) to reach CNY8810/ton ($1127/ton without VAT). LLDPE contract settled at CNY205/ton ($31/ton) higher, reaching CNY9675/ton ($1238/ton without VAT).

Trading activities in domestic spot market seems to be slower though actual offers for both PP and PE still inched up CNY50-100/ton ($7-14/ton) day on day. Many traders are holding back on their cargoes, hoping that futures market would continue to firm up in the coming day, which ultimately lead to higher profit margins. Buyers are on the other hand; remain conservative about placing large order, as end product prices are not catching up.

A large scale packaging manufacturer said, “Our plant is not affected by the environmental inspection and therefore, end product business is satisfactory. We have received good number of order until mid of September and might need to replenish raw material in the near term. However, prices are too high now and we prefer to be cautious.” The converter is using LD heavy duty, metallocene PE, LLDPE C4 film and HDPE film.

In the import market, several deals for Iranian HDPE film (7000F grade) are concluded at $1130-1135/ton CFR China, TT in advance term, which is about $30/ton below initial offers. The source added, “PE market is supported by strong ethylene costs, yet buyers are resisting any attempt to hike prices. Deals might drop if suppliers insist on higher price levels.”

Converters in the PP sector are reportedly able to increase end product prices, however profit margins remain squeezed as raw materials cost move higher. There are very limited movement in the import homo-PP offers, yet there are concerns that market is heading for stabilization as domestic supply improved, in line with the restart of a number of previously shutdown plants. Players are also discussing a possibility of reduced import homo-PP from India as territorial tension escalated between China and India. More update on this issue would be available soon.

In Southeast Asia, the general sentiment remains firm even with the absence of Indonesian buyers due to National Day holidays. Import LLDPE film to Vietnam hit above the $1200/ton threshold for the first time since late April thanks to skyrocketed ethylene costs and satisfactory demand in nearby China market.

South Korean LLDPE film hit $1205/ton CIF northern Vietnam, LC AS term today with limited quantity available. A buyer commented, “Prices increase too quickly though acceptance level is still low. We are waiting for other international suppliers to announce fresh prices before making additional purchases.”

Several other deals for Saudi Arabia LLDPE film are reported at $1150/ton CIF Vietnam, LC AS term, indicating better market acceptance for this cargo. A trader made a purchase said, “Apparently import PE prices might continue to firm up in the near term and we are negotiating with Thailand producer to conclude some LLDPE film quantity at the same prices. With Korean maker lifted prices to above the $1200/ton mark, other producers would likely to follow in the coming week.” The trader reportedly re-export Thailand LLDPE film to China at $1180/ton CFR term this week, claiming better margins comparing to selling in local Vietnam market.

Demand in Philippines is not very strong, which is very disappointing at the time that preparation for Christmas and New Year would have taken place, player said. Explained to such condition, a market source informed, “Many buyers have purchased at lower prices in previous month and currently waiting on the side-line for the parcels to be delivered due to some delays. This condition might prolong until end of September, hence we are very cautious at the moment.”

The regional PP market remains relatively stable with a major Saudi Arabia producer roll-over homo-PP prices to Vietnam at $1120/ton CIF, LC AS term – which is unchanged for about three weeks now. Buyers are concern about the near term market prospect as sentiment loosened up. A Vietnamese buyer added, “We purchased 10 containers of Thailand homo-PP yarn at same price level, which is way more competitive than Middle Eastern cargoes.” Besides, South Korean homo-PP also offered at $1130/ton to Vietnam, with no import duties applied. Despite the limited quantity reported, these cargoes have generate an impact on buyer confident.