Asia Daily PP and PE Overview 29 September 2017

In China, futures market spends most of the day on the green side, which support the spot sentiment. January delivery contract for PP gained CNY222/ton ($33/ton) from the previous session to close at CNY9287/ton ($1197/ton without VAT). LLDPE contract once again hit above the CNY10000/ton mark, closed at CNY10060/ton ($1297/ton without VAT), a CNY155/ton ($23/ton) increased day on day.

Purchasing activities in domestic spot market remain steady and with large price gap between spot and futures LLDPE film, arbitrage traders are now active again. According to CommoPlast data, this gap is now at about CNY285/ton or $43/ton, which is relatively attractive to traders. There have been concerns that spot market might face price correction, as futures contract number 1709 is due for delivery within the first 10 days of September. It is reported that the registered warehouse receipts for September contract has reached nearly 4000 lots (1 lot = 5 tons) for LLDPE alone. Meaning to say that there is an approximate 20,000 tons of LLDPE will be dispensed to the market in the coming weeks. While the concern appears to be heavy, some of the weights are taken away on news that several local coal based polyolefins plants shall go off-line due to coal supply shortage. A trader commented, “We are very confident about September market outlook, not only with limited supply from domestic suppliers but also lack of cargoes from overseas sellers. The traditional high demand season is set to start soon, and thus firmer prices become inevitable.”

In the import market, both PP and PE offers continue moving higher and price below the $1150/ton mark for regular LLDPE film cargoes have disappeared in the market. A trader informed, “HDPE film is especially tight though deals at the $1200/ton threshold is still rare. USA cargoes might only be coming by first quarter 2018, hence outlook for the remaining of the year seems positive.”

At the meantime, deals for Middle Eastern homo-PP are reported in the range $1130-1150/ton CFR China, LC 90 days term and is expected to persist on the firming track in the near term given falling cargoes availability.

In Southeast Asia, market has not seen much changes from the previous trading session as buyers are not active in making fresh replenishment while international sellers show no intention to adjust offers. The recent hike in import PE offers to Vietnam is now facing stiff resistance, especially cargoes priced nearing the $1200/ton threshold.

A Saudi Arabia producer in the previous week opened new offers at $1170/ton for LLDPE film and $1160/ton for HDPE film, an increase of $30/ton and $60/ton respectively from last month. Distributors for these cargoes are only able to conclude small deals since the maker refused to enter any price negotiation. “Buyers have not been able to accept these offers. This condition is not expected to persist, as supply is very tight following the shutdown at several petrochemical plants in Houston, USA due to hurricane. Buyers might need to replenish at even higher levels in the coming weeks.”

Regional buyers are on the other hand, not responding strongly to the shutdown at several major plants in USA, pointing to the difficulties they face in obtaining sufficient end product orders amid traditional slow season. On a theoretical level, these shutdowns would dampen supply to a certain extent, especially when global buyers are hoping to see more competitive USA cargoes during the final quarter of the year.

The regional PP market is having better position as buyers seem to have accepted the firming trend, just that the cautious stance remains prominence. Vietnamese homo-PP yarn is concluded in Indonesia at $1210/ton CIF, LC AS term with a trader added, “We prefer to sell in small quantity at the moment, though our regular customers are still placing inquires. We are planning to implement a small hike for the coming week.”

Even in Vietnam, couples of overseas sellers are lifting import homo-PP yarn to nearing the $1200/ton mark, which encourage some buyers to purchase cargoes at the lower end of the overall price range - $1130/ton CIF Vietnam, LC AS term. “A major supplier from Thailand and Saudi Arabia opened homo-PP yarn prices in the range $1180-1200/ton, which we find it hard to accept. We decided to procure a small quantity of Middle Eastern cargoes from trader at $1130/ton today.” Vietnamese players are hoping to see better trading activities after the National Day on 2 September, as large-scale converters are running low on inventories.