Asia Daily PP and PE Overview 9 January 2018

CHINA

• Import PP and PE hold firm
• Pre-Lunar New Year replenishment expected to start soon

Polypropylene (PP)

Total PP and PE inventories at major domestic producer’s warehouses fell 30,000 day on day to approximate 620,000 tons as of 9 January 2018, reflecting continued purchasing activities despite many converters are suffering from thin profit margins. Traders only offer a CNY50/ton ($8/ton) discount for serious byers.

Sources are hoping to see better purchasing activities in the coming week, in line with the inventories preparation before the long Lunar New Year holiday break. “Our concern is that current prices are too high and as a result, buyers might refused to procure large quantity,” a trader said.

In the import market, dutiable homo-PP cargoes below the $1180/ton mark have not repeated. “There are very few offers from overseas sellers. Vietnamese homo-PP cargoes are standing at $1250/ton CFR China term and we are negotiating to obtain a small discount to secure some quantity,” a buyer said.   

Polyethylene (PE)

Delivery in local market, especially Northern China area is facing serious challenge due to heavy snow condition. This might risk piling stock at producer’s warehouses, in which suppliers are providing CNY100/ton ($15/ton) discount for purchased volume 200 tons and above in order to stimulate pre-order from converter side.

Import HDPE blow molding to China skyrocketed more than $135/ton on an average this week reaching $1290-1380/ton CFR China, LC 0-90 days term. Chinese players are complaining about the limited availability of this grade in the market, especially for Iranian cargoes. “At the meantime, a number of our customers are sourcing this cargoes to mix with HDPE film and HDPE pipe in manufacturing respective end products, with hope to reduce production costs. As a result, pushing prices higher,” a trader informed. However, buyers appear to have less interest in cargoes offered above the $1350/ton threshold, citing the rapid fall in profit margins. While market might remain firm in the near term, room for further increases is narrowing down if buyers continue to resist higher levels.

SOUTHEAST ASIA

• Import HDPE film offers continue moving higher
• Buyers expect to see higher homo-PP prices

Polypropylene (PP)

The regional PP market remains very firm with support from strong upstream propylene costs and improved demand condition in the nearby China market. Overseas suppliers are allocating smaller quantity of homo-PP cargoes to Southeast Asia claiming to have achieved better margins from other markets. “We have sold few hundred tons of Saudi Arabia homo-PP to Vietnam at $1200/ton CIF, LC AS term and the remaining quantity is minimal. Buying interest is now weaker, yet room for further increment still presence,” an international trader said.

In fact, many players are expressing strong expectation for another $20-30/ton increased on import homo-PP in the coming weeks. “The firming momentum is still there. Buyers have accepted the current market levels and persistent lack of supply would support the firming track,” a source added.   

Polyethylene (PE)

Most import HDPE film offers to the region have surged above the $1300/ton threshold after a brief stabilised period. Supply shortage condition is worsening and many converters decided to source additional quantity before further hike emerge. “We requested for 400 tons, however, our Southeast Asian supplier only can provide half of the quantity. Local market is very tight at the moment, hence we accepted higher import offers to safeguard stock levels,” an Indonesian customer informed.

Ethylene costs in Asia have reached multi year high levels, yet there are still clear signs that market might continue to advance in the near term. Meanwhile, it appears that HDPE supply within Southeast Asia might not ease as soon an expected with two major Thailand producers are mulling over maintenance shutdown at their HDPE lines in February – March.