Asia Daily PP and PE Overview 7 November 2017

In China, futures market persist on the positive side with January delivery contract for PP added CNY89/ton ($13/ton) to reach CNY9156/ton ($1182/ton without VAT). Same contract for LLDPE gained CNY65/ton ($10/ton) at CNY9885/ton ($1276/ton without VAT).

Spot market seems to have responded very promptly to the latest development in futures trading, reflected in a considerable drop in the number of deals concluded. On an average, sources are seeing 40% reduction in sales quantity compared to the first trading day of the week. Buyers are withdrawing to the sideline, however optimistic traders continue to carry bullish expectation considering the general tight supply condition in the country.

In the import market, Thai producer lifted HDPE film offers by $30-40/ton to 1330-1340/ton CFR China, LC AS term, which stirred market concern if prices would break the previous high based on the current supply condition. At the meantime, re-export Iranian HDPE film cargoes from Turkey started to show up in China with deals reported at below market levels of $1240/ton CFR China term.

In the PP sector, a deal for Indian homo-PP is reported at $1100/ton for 300 tons, CFR China, LC 30 days term. However, this is considered as a special transaction and might not represent the actual market condition. In fact, most deals for dutiable cargoes are at $1130-1150/ton CFR China, LC 0-90 days term. “Market has bottomed out and buyers accepted higher prices week on week. We think the firming trend might continue to take place if local ground remain resilient,” trader commented.

In Southeast Asia, import PP market becomes active, especially in Vietnam, as a number of deals reported after a major Saudi Arabia producer cut prices below the $1150/ton threshold. Most transactions are observed at $1140/ton CIF Vietnam, LC AS term, though other buyers are placing bids at $1130-1135/ton with the same term.

Vietnamese buyers are generally share similar expectation that PP market is nearing the bottom, considering the revived buying appetite in the nearby China market and the strong energy complex. “We purchased 300 tons of Saudi homo-PP at $1140/ton. Room for further reduction is limited while we are not having sufficient inventories for first quarter next year,” a converter said. Even traders are returning to make replenishment, though the quantity is relatively smaller. This has shown the acceptance among players, which might indicate a possible rebound around the corner.

Indonesian buyers are taking action too, just yet mainly focus on placing bids and pressurising domestic traders to bring local prices to below the $1200/ton FD Indonesia, without VAT, cash term. “In contrast, prices are inching up slightly as traders are sensing the bottom prices in China. We are discussing with the supplier to close a small deal,” an Indonesian buyer commented.

The regional PE market is quieter despite firm upstream ethylene costs. Major regional producer slashed metallocene PE (mPE) offers by $40/ton from last month, reaching $1340/ton for Singaporean origin and $1360/ton for Thailand origin, all based on CIF Indonesia, LC AS term. Buyers appear to be in need to make replenishment given low on-hand inventories, however the presence of deep-seas cargoes below the $1300/ton threshold putting buyers on high alert for additional reduction in the near term.

Suppliers for other PE film grades are facing difficulties to attract deal at prices around the $1200/ton mark for LLDPE film. A trader offer Indian LLDPE film at $1140-1150/ton CIF Vietnam, LC AS term said, “Buyers are placing bids at $1120/ton with the same term and we are considering. We are also having Middle Eastern LLDPE film at $1230/ton however, there is no interest.” It becomes clear that except for HDPE film, other grades have yet to catch up with the pace.