Asia Daily PP and PE Overview 12 October 2017

In China, futures market seems to regaining some balance toward the end of the week. PP contract drop only CNY16/ton ($2/ton) from the previous trading day, to reach CNY8691/ton ($1127/ton without VAT). LLDPE contract added CNY90/ton ($14/ton) to reach CNY9530/ton ($1236/ton without VAT)

It appears that converters in the flexible packaging and agricultural film sector are still making replenishment to fulfil high number of end product orders. Just that purchases are concentrating in local ground as suppliers continue to offer up to CNY150/ton ($23/ton) discount on deals for PP and LLDPE film. In contrast, HDPE film stays relatively firm due to short of supply from both domestic and overseas sellers. “We lifted HDPE film offers by CNY100/ton ($15/ton) from the previous trading day and still able to conclude deals. There are not many suppliers having cargoes at the moment and this condition might also help keeping LLDPE film market firm,” a trader commented.

Converters in the BOPP sector are coping very well wit the traditional high demand season. Most contacts claimed to have satisfactory profit margins at the current raw material prices, “And therefore, we are maintaining production rate steady this week. We plan to make replenishment batch by batch, seeing the recent weakness in the futures market,” a BOPP sheet manufacturer said.

Import LDPE film apparently is the weakest performing product in term of demand in the import market. Overseas suppliers are either cutting prices to smoothen sales process or encouraging buyers to place bids at well below offered levels. Indeed, Qatari LDPE film cargoes are concluded at $1200/ton CFR China, LC 60 days term today, which is $30-40/ton lower than offers given. “Meanwhile, South Korean supplier is open to negotiation. We are not very interested in making fresh buy now that on hand stocks are comfortable,” a Shanghai based trader added.  

In Southeast Asia, buying interest for import homo-PP start to pick up after overseas suppliers agreed to discounts. A number of deals for both dutiable and non dutiable cargoes to Indonesia are reported at $20-30/ton reduction from initial offers; however, many buyers are still waiting on the sideline, projecting that prices might be lower in the coming week.

Players are blaming the sluggish buying interest for import cargoes to the fact that most Indonesian buyers are running out of quota for Bea masuk ditanggung pemerintah (BMDTP) or Import Duty Borne by the Government scheme. And as a result, many buyers might need to wait for the re-newal of BMDTP before they can purchase additional cargoes from import market. Vietnamese homo-PP concluded at $1200/ton CIF Indonesia, a $30/ton below initial offers, breaking the extended period of holding prices firm. “We think market is entering the correction period and likely to witness additional discount in the near term. Besides the BMDTP issues, the market expectation is also holding the purchasing activities back,” a buyer said.

With Saudi Arabia homo-PP reaches $1150/ton CIF Indonesia this week, buyers in other market within the region just take a step back waiting for prices to come down. “The softening trend is becoming clear now. Tight supply might keep market from any significant drop, however, we planned to only make replenishment if offers are $20-30/ton softer than current levels,” a Vietnamese converter commented.

It is also reported that an international supplier is collecting bid for South Korean homo-PP in Vietnam at $1170/ton CIF, LC AS term. This cargo is duty exempted. “If the deal go through, the pressure on dutiable cargoes is immense. We are monitoring very closely this transaction ath the moment,” a Vietnamese trader said.

The PE market is hinging on the firm ethylene costs situation, though traders started to loosen their stance too. Saudi HDPE blow molding are concluded in Vietnam at $1150/ton CIF, LC AS term, a $30/ton decreased from initial offer given two weeks ago. “Only at this price we manage to deplete all 450 tons of on hand material. We merely make any profits, however market resistant was too stiff,” a trader said.

Similar to China, tight supply continue to keep HDPE film premium over other grades while LDPE film appears to be weak. A Middle Eastern supplier cut LDPE film offers to Indonesia by $30/ton from last month to $1270t/ton, CIF, LC AS term. “Producers are loosing confident as post holiday demand in China only concentrate in local market. In spite of the absence of USA material, we think some producers are still under pressure to clear inventories before year end book keeping. We are on the wait and see mood,” an Indonesian buyer commented.