Asia Daily PP and PE Overview 4 December 2017

CHINA

• Surging futures market spread little impact on spot sentiment
• Limited offers with mPE continue to weaken

Polypropylene (PP)

Futures trading have been intensifying for two sessions streak, and yet, little movement is seen in the spot ground. Both import and local markets have been steady in the past several weeks, a condition that players expected to persist throughout this month. An interesting development is that many BOPP sheet makers have received end product orders for the first quarter next year, yet showing no eager to stock up materials. “Current prices are too high. We have given up a great deal of our margins due to intense competition and high raw material costs. It is better to source hand to mouth, waiting for market to go softer before making larger buy,” a converter explained.

Import homo-PP persists in the range $1130-1140/ton CFR China, LC 0-60 days term. It raises question that in spite of $40-50/ton gap with May delivery futures contract, arbitrage traders are still not scouting for quantity. It is worth monitoring such activities as this could be the final shot for both futures and spot market before entering the holiday season this month end.    

Polyethylene (PE)

Though HDPE supply has eased slightly, it is not sufficient to drag prices lower significantly. Local suppliers continue to lift HDPE offers by CNY100/ton ($15/ton) citing the lack of inventories pressure while many expressed great intention to implement further hike in the near term. “However, these are purely for ready cargoes in local market. For deep-seas materials, we are looking at stable to softer trend,” a trader said. The source expressed the disappointment in LDPE market though it is the traditional peak season for agricultural film sector as suppply for this grade is a little lengthy.

Import mPE from couple of major Southeast Asian producers seems weakened slightly. Singaporean mPE emerged at stable to $20/ton softer week on week, bringing the latest price list to $1340-1350/ton CFR China, LC AS term. At the meantime, Thailand mPE re-appear in the market this week after several weeks absence as the producer starts commercial run at the new 400,000 tons/year mPE unit today. Offers for the cargoes stand below the $1300/ton threshold, at $1290/ton CFR China term with room for negotiation open wide. “mPE market in under substantial pressure due to weakened LLDPE c4 market. Our customers are not responding even at the current offers. We are discussing with buyers and might implement additional discount to entice purchasing interest.”

SOUTHEAST ASIA

• Import homo-PP seems firmer
• 2018 import duties issues in Vietnam finalised

Polypropylene (PP)

Besides the lack of sales pressure, international suppliers are now having additional support from the strong energy values and firming upstream propylene costs to lift import homo-PP offers to the region. Both dutiable and non-dutiable cargoes see an increased of $5 to $20/ton week on week, yet very limited real transaction observed, especially in Indonesia given the fact that buyers have made sufficient replenishment. A buyer informed, “Our supplier insist on $1200/ton level for Vietnamese homo-PP, which is a little high compared to local material. We decided to skip buying this time.”

In Vietnam, Circular number 125/2017/ND-CP signed on 16 November 2016 defined the new import duties of 3 per cent imposed on import PP copolymer under HS code 3902.30 (including both block and random copolymer). This product has been enjoying zero import duties throughout past years due to the unavailability of local production. Countries that are having free trade agreement with Vietnam, including Southeast Asia, China, Japan, South Korea, Australia and New Zealand are not subjected to import duties for any petchem product with form CO presented. In the nutshell, import homo-PP and PP copolymer to Vietnam will be imposed 3 per cent duties starting 1 January 2018 while import PE to the country remains duties free for all origins.

Polyethylene (PE)

There are very limited new offers seen on the first trading day of the week. Many international traders seems disappointed with the sales result for December shipment as demand remains lacklustre even after the price adjustment reported in the previous week. LDPE film market seems especially short of momentum. Vietnamese buyers are receiving invitation for bids for Saudi Arabia’s LDPE film cargoes at $1230/ton CIF, LC AS term, a $20 below initial price list. “The heat is just not there even with the current crude and ethylene costs. We are in no rush at make new buy, instead wait and see for clearer signal,” a regional buyer commented.

Domestic PE market in Indonesia is escalating, regardless of the demand condition. Both local producers issued hike of up to IDR300,000/ton ($22/ton) for both HDPE and LLDPE week on week. “Buyers seems to have made sufficient purchases and hence, very irresponsive toward the latest price list. We fear that large discounts might need to be in place in order to attract attention,” a trader said.