Asia Daily PP and PE Overview 16 October 2017

In China, futures market continues to recover from the falling trend in the previous week. PP contract for January delivery added CNY272/ton ($41/ton) to close at CNY9110/ton ($1183/ton without VAT). LLDPE contract gained CNY145/ton ($22/ton), reaching CNY9795/ton ($1272/ton without VAT).

Domestic spot market remains steady with traders returning to make purchases hoping that futures market would remains firm in the coming days. Offers for both PP and PE inched CNY50-100/ton ($8-15/ton) higher to reflect better sentiment in both futures and spot ground. “However, converters seem to have made sufficient replenishment and temporary just wait on the sideline. We remains positive about the near term outlook due to tight availability,” a trader said.

Multiple issues have been identified as the contributing factors to the tightening HDPE film supply condition. Besides the lack of recycle material and the serious delay of Iranian cargoes, players are pointing to the switch in domestic production. Many local producers shift to produce HDPE pipe in a wake of strong demand from pipe sector after the government announced support scheme to build intensive gas line to substitute coal power to reduce pollution.

In the import ground, international suppliers hold homo-PP prices unchanged from last week, though the number of deal concluded is rather disappointed. Local cargoes are still in favour of buyers at the moment due to the competitiveness. Meanwhile, import LLDPE film is facing tremendous downward pressure. Indian LLDPE film cargoes are concluded in the range $1130-1140/ton CFR China, LC AS term, which players find it attractive. “We were initially planning to offer Iranian LLDPE film at $1180/ton and decided to withhold the cargoes to see further development. Buyers seem to be waiting for discounts, making difficult to speed up sales process,” a trader informed.   

In Southeast Asia, there have not been any drastic movement reported on the first trading day of the week. Transactions are limited as buyers are mostly on the sideline waiting for discounts to emerge while suppliers refuse to cut offers claiming limited availability.

Import homo-PP from Saudi Arabia to the region hold steady at $1160-1170/ton CIF, LC AS term. The lower end at $1150/ton reported in the previous week has not repeated as a result of the firm stance from suppliers. An international trader offer Saudi homo-PP at $1160/ton to Vietnam and Indonesia, CIF, LC AS term said, “Demand is very weak and we only manage to close some deals at the offered level. Most buyers continue to place bids at below the $1150/ton mark, however, we are not planning to adjust prices anytime so soon.”

The reluctance to accept the current market prices amongst buyers is very clear despite the fact that general supply is not comfortable. It is understandable for the situation in Indonesia as reported earlier regarding the BMDTP issues, with an international trader added, “We have also reduced offers for Middle Eastern homo-PP to $1160/ton CIF Indonesia this week. Our customers are very cautious, some have informed about the intention to only make fresh buy by mid-November. We think room for further reduction is tightening up.”

In the import PE market, overseas sellers have yet to announce fresh offers, however, market sources are reporting that Vietnamese traders are re-exporting HDPE film to China, where supply is drying up. “Demand for PE in Vietnam is not strong and likely to persist in this condition in the near term. It would be a better choice to redirect cargoes to higher margins market,” a trader commented.

At the meantime, domestic PE market in Indonesia fell for the first time in sixteen weeks, especially LLDPE film, recorded significant drop of IDR870,000/ton ($65/ton). Persistent weak demand is blamed for such development. Indonesian buyers are surprised with the price cuts citing the limited HDPE supply condition while also raising concern over the near term outlook. A market source informed, “The producer might be attempting to deplete some stock ahead of the year-end book closing, hence the downward pressure is there. We prefer to hold wait and see stance as end product businesses are weakening due to monsoon season.”