Asia Daily PP and PE Overview 25 October 2017

In China, futures market showed weaker trend from previous trading day with January delivery contract for PP decreased CNY80/ton ($12/ton) to CNY9005/ton ($1159/ton without VAT). LLDPE contract rebounded CNY10/ton ($2/ton) to CNY9885/ton ($1272/ton without VAT).
 

There are very limited activities in domestic spot market as players adopted conservative stance following the National Congress of Communist Party. Offers for both PP and PE drop another CNY50-100/ton ($8-15/ton) as a result. The slower purchasing activities since beginning of the week resulted in a surge in total PP and PE inventories at major domestic producers’ warehouses by approximate 30,000 ton to around 710,000 tons as of 25 October. If this condition persists in the coming week, inventories pressure might become real. “We managed to close several deals after the price adjustment. Buyers are very reluctant to build inventories, which might lay a steady and continuous hand-to mouth replenishment path ahead,” a trader commented. 

It is reported that supply for PP China is improving with several plants resumed production after the shutdown while import arrival is high. In fact, according to the preliminary report on September import statistic in China, homo-PP cargoes arrival jumped nearly 20% from the previous month to approximate 250,000 tons.

The PE market hinges tight on the limited supply condition. Any sign of an eased in cargoes availability might harm the existing firm trend as buyers are resisting the current prices. “Demand for our end product is regular, however we are not generating adequate profit margins since raw material prices are too high. We do expect a price correction to take place given weak buying interest and softening upstream market, hence we prefer to be cautious,” a converter said.

As reported earlier, ExxonMobil has started up two high performance LLDPE units in Houston, Texas earlier this month and cargoes might become available for export soon. “We are on standby mode as offers for the fresh cargoes would emerge anytime,” an international trader speciallising in handling USA material said.

In Southeast Asia, more international suppliers opened new offers for November shipment to the region, which follow the same rhetoric set in the previous session. Import HDPE film prices remains on the stable to firmer trend, riding on the limited supply condition, though deals are observed with discount.

A Saudi Arabia producer announced PE offers to Vietnam earlier this week has reportedly closed deals at $1190/ton for LLDPE film and $1210/ton for HDPE film, CIF Northern Vietnam, LC AS term, a $20-30/ton reduction from initial price list. “We are still waiting for final prices from the producer and offers to Southern area are normally $10/ton below Northern. We plan to make only small purchase this time,” a Ho Chi Minh based buyer commented.

At the meantime, another Saudi maker offers LLDPE film at $1200/ton and HDPE film at $1270/ton to Vietnam at the same term. The large price gap between the two grades surprise the market, however, it also cause great concern about the near term trend.

Two other Saudi Arabia producers have also opened new PP and PE offers to the region and except for HDPE film, most other grades see small reduction of $10-20/ton month on month. “Supply for homo-PP is extremely limited due to the on-going shutdown. We are informed that production at the line would only resume by 7 November. Our customers are not responding very well to the prices pointing to the availability of more competitive cargoes in the market at the moment,” a distributor offer homo-PP at $1190 CIF Vietnam reported.

Import homo-PP Middle Eastern origins to Indonesia at $1170-1180/ton CIF, LC AS term appear to be not very attractive to buyers too, considering the current weak condition in local ground. “It is very challenging to close deal at such level with domestic cargoes traded at $1220/ton excluding VAT, FD Indonesia, cash term. Besides, demand in the woven bag sector is weakening due to monsoon season,” a trader said.