Asia Daily PP and PE Overview 24 August 2017

In China, the heat that stimulated futures market over the past week appears to be cooling down and January delivery contract for both PP and PE concluded at relatively soft levels. LLDPE contract dropped CNY30/ton ($5/ton) to CNY9940/ton ($1276/ton without VAT). PP contract closed at CNY9085/ton ($1166/ton without VAT), only CNY2/ton higher than the previous session.

It is interesting that some prime grade USA PE cargoes emerged in China today at $1140/ton for LLDPE film, $1120/ton for HDPE blow molding and $1220/ton for LDPE film, all based on CFR China LC 60 days term. At the meantime, Dow Chemical has started up the 450,000 tons/year LLDPE unit in Freeport Texas, USA and some off-grade cargoes show up in China this week at $1020/ton CFR term. Though the quantity is not large, players are watching out for USA material offers, concerning that market would be flooded like previous year.

Meanwhile, there are very limited numbers of new offers observed in the market, especially for Iranian material. It is reported that Bakhtar Commercial Company (BCCO) is still operating its 300,000 tons/year HDPE/LLDPE swing plant at low rate due to lack of ethylene supply, leading to a series of delay in shipment to China. Such tight supply condition is expected to keep the market on the firm note throughout the first half of September, players said.

Local suppliers are not facing inventories pressure either with total PP and PE stock at domestic producer’s warehouse fell about 25,000 tons compared to earlier this week, to approximate 575,000 tons today. As a result, latest spot offers for both PP and PE firm up CNY100-200/ton ($15-30/ton) from previous trading session. 

In Southeast Asia, international and regional suppliers are very firm on prices as the firming trend persists in the nearby China market. While buyers are waiting for fresh September shipment offers; couple of sellers decided to withdraw their homo-PP offers, with expectation of further hike to emerge in the coming days.

South Korean suppliers reportedly sold out available homo-PP cargoes to Vietnam at $1150/ton CIF, LC AS term. A source close to the producer informed that most deals are at small quantity as buyers are still lack of confident to make large purchases. Meanwhile, an international trader suspended all offering for Saudi Arabia homo-PP to Vietnam. The source said, “We were struggling to attract buying interest earlier this week at the level $1130/ton CIF Vietnam, LC AS term. However, China market is firming up and this would cushion the trend in Southeast Asia. We plan to implement small to moderate hike for the next price opening.”

Indonesian customers on the other hand, are very cautious about the near term market outlook and most questions are pointing to the sustainability of the current trend. “Demand from the woven bag sector is very weak and we have not been able to transfer higher raw material costs to end product prices. We are not planning to make replenishment anytime so soon despite non-dutiable homo-PP cargoes are moving above the $1200/ton threshold.” Players fear that the current trend might be short lived as the downtrend might take place if Chinese buyers slow down purchasing activities.

The regional PE market appears to have more activities as buyers are closing deals for September delivery parcels. A major Saudi Arabia producer announced fresh HDPE and LLDPE film offers to Vietnam and Indonesia earlier this week reportedly sells out most of the cargoes on hand with small discount. A distributor said, “We concluded some deals for LLDPE film to Indonesia at $1160-1170/ton CIF, LC AS term and at the moment we only have small quantity on hand. Our customers decided to make small purchases this month only as prices are higher than acceptance levels.”

Meanwhile, the number of deals reported in Vietnam market for PE is mediocre and buyers are not showing the strong urge to stock up cargoes. This is blamed to the persistent slow demand condition in local ground with a trader commented, “Buyers are having high end-product inventories and would only procure raw material if prices are low. We are hoping that stronger international ground would support local market. Our concern is that ethylene costs seems to be nearing the peak and replenish material at the moment might be risky.”