Asia Daily PP and PE Overview 12 January 2018

CHINA

• Domestic sentiment brightened
• Import homo-PP inched higher

Polypropylene (PP)

Purchasing activities in domestic spot market revived with converters become more active in making replenishment given the continuous firming trend in futures trading. However, it does appear that converters are very cautious about large purchases, especially BOPP buyers, amid thin profit margin for end products. “And therefore, we are monitoring closely the pre-Lunar New Year replenishment activities, fearing that high raw material costs would discourage aggressive buying stance,” a trader commented.

In the import market, deals have been reported at higher levels. Saudi Arabia homo-PP cargoes are dealt at $1195/ton, CFR China, LC 90 days term, only $5/ton discount from initial offer level. A Southeast Asian trader claimed to have sold Vietnamese homo-PP at $1280/ton CFR China said, “Market is very hot and the near term outlook seems very positive.”

Polyethylene (PE)

It is reported that agricultural film manufacturers in Northern China area are actively seeking for spot PE cargoes from domestic supplier amid heavy snowfall in recent weeks. “The preparation for the traditional peak season (which usually start in March) is earlier than usual. Market has abundant support to remain strong in the coming weeks, and in line with delivery issues, buyers might want to stock up inventories soon,” a source said.

There are very few new offers in the import market. Several traders are complaining about difficulties facing in sourcing Saudi’s LLDPE film cargoes even at the price level $1190-1200/ton CFR China term. At the meantime, rumors about congested cargoes at United Arabia Emirate’s transit ports due confusion during the implementation of the VAT in the region, is getting thick. “We were informed that shipment from Middle East would be delayed 10 days from initial schedule due to the issues. Other than that, no other things are very serious,” a buyer commented.

SOUTHEAST ASIA

• Import offers continue galloping higher
• Positive expectation on market outlook in the coming week

Polypropylene (PP)

It appears that overseas suppliers have successfully achieved new hike in import homo-PP prices to Vietnam as Middle Eastern cargoes reportedly concluded at  $1210-1220/ton, a $10-20/ton higher compared to earlier this week. At the moment, most suppliers have suspended all offering while planning to introduce additional increases in the coming week. “Supply is very tight and buyers have no choice but to accept the new levels,” a trader said.

It is still unclear on how much further would the current uptrend sustain, however, Vietnamese buyers started voicing concern that prices above the $1250/ton threshold would seriously damage end product margins, which might mark the cyclical price ceiling. “End product business is weak and many are cutting prices by as much as 20 per cent in order to deplete stock. Too high raw material costs might bump into strong resistance,” a source commented.

Import PP block copolymer to Indonesia also witness relatively healthy hike week on week, especially on South Korean and Singaporean parcels, which currently stand at $1350-1390/ton CIF, LC AS term. A buyer commented, “We attempted to bid for last week’s level [at $1270/ton] for South Korean cargoes, however, the supplier rejected claiming good sales to other markets. We have no choice but to procure some quantity at the current market levels.” 

Polyethylene (PE)

Import HDPE film from Middle East to Vietnam has been concluded at $1330/ton CIF, LC AS term- about $10-20/ton higher than the average price level reported earlier this week. There are no signs that the supply crunch could recover anytime so soon which potentially cast spillover effect on other PE film grade.

Ethylene costs in Asia have reached the highest level since late April 2015 and might likely to remain stable in the near term despite the fact that supply is easing slightly due to lower operating rate at downstream PE plants. At the current ethylene prices, it is more profitable for integrated producers to sell ethylene than making PE, which might keep PE availability tight for the immediate term.