Asia Daily PP PE Report 01 Apr 2016

In China, futures prices on Dalian Commodity Exchange make a big jump today after official manufacturing gauge showed improving conditions for the first time in eight months, spurring trader optimism about the prospect market demand. Contract number 1609 for PP leaped CNY401/t ($62/t) to settled atCNY6994/t ($915/t without VAT) while LLDPE contract advanced as much as CNY305/t ($47/t) to reach CNY8670/t ($1135/t without VAT).    

Physical spot market therefore gains a solid support to extent the firming trend today. Both PP and PE cargoes see an increase of CNY100-200/t ($15-30/t) compared to yesterday and demand for PP and LLDPE from local buyer is reportedly picking up. A trader in Zhejiang said, “We elected to maintain our offers unchanged for regular customers and good news is that we managed to conclude a satisfactory number of deals today. Next Monday the market will be off, however, we expect the firming trend to sustain through out the month of April.” Auction for coal-based PP was pretty good, according to players. 

Meanwhile, the import market has yet to react to the drastic upsurge in the futures trading with most homo-PP offers remained unchanged from earlier trading days. A trader in Ningbo commented on this matter said, “Many of manufacturers prefer to source local material now for better costs and shorter shipping time which allows them to minimize risks. Import volume therefore shrinking. We think market trend might follow a relatively firm trend due to limited supply.” The import PE market is moving up gradually with Middle Eastern LLDPE film reaches $1200/t CFR China level. A trader received the offer said, “We are considering to purchase this cargoes since overall supply is tight and April outlook might be firmer. However, we are expecting the extent of additional price hike might not be large given the speedy gain previously.”

In Southeast Asia, market sentiment remained firm however buying interest is diminishing alongside with stronger buyer resistance towards high price level. In spite of sour demand condition, players are not expecting any price reduction as limited supply is still having an upper hand in this tug-of-war. A major Southeast Asian producer lifted offers for HDPE film by $30-50/t compared to last week to reach $1280-1300/t CIF SEA, LC AS term. Source from the producer informed, “We tried to sell at the higher range of the offer and managed to close some deals, therefore we are considering whether to withdraw the lower range offer. Supply is not that ample and we think buyers might slowly accept the current high price.” Regional local markets meanwhile recorded a real mix situation with Malaysian buyers receiving large increases from domestic maker despite strengthening local currency. A PE bag converter in the country said, “Demand for our end product is regular at the moment and we are operating at 70-80% capacity. Raw material prices have increased sharply these days, but we have not been able to transfer to our end product prices, which resulted in thinner profit margins. We are sourcing mostly on need basis from domestic market now to minimize potential price risks.” In contrast, Vietnamese players are seeing some small discount on locally held PE cargoes due to weaker buying interest.

There is very limited activity in the PP market on the last trading day of the week, yet not many have expressed their expectation for any price reduction in the coming days. An international trader said, “Supply tightness is elevating the whole regional market in the past month. Looking ahead, we are not expecting any price cut, yet further hike would be hurdled by limited demand. We would only receive fresh offers from our Middle East principal by the second week of April and we are expecting homo-PP to be capped at $1070-1080/t CIF SEA level.” In Indonesia, sentiment appears to be calmer after a prolonged period of continuous price rally. A converter in the country added, “Local supply has yet to show any improvement recently, just that buyers have replenished sufficient quantity now. We think that the current firming trend might sustain until the first half of May, yet we remain cautious seeing other market slowing down.”       

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