Asia Daily PP PE Report 28 Apr 2016

In China, futures prices on Dalian Commodity Exchange make a sudden turn to south after three consecutive days of gains. Contract number 1609 for PP slashed as much as CNY225/t ($35/t) from previous trading session to settle at CNY6992/t ($921/t without VAT). Contract for LLDPE settled CNY140/t ($22/t) lower at CNY8660/t ($1140 without VAT).

Local producer maintains spot PP and PE offers mostly stable from yesterday after seeing weaker futures market performance. However, a number of traders elected to give slight discount of CNY50 ($8/t) to entice demand with a trader in Zhejiang said, “Local inventories have gone down a little after flash purchases made by traders past couple of days. This might give producers a support to lift their domestic prices in the coming week. From our side, we are not confident about May outlook as long as buyers remain on the sideline.”

Import market sees little movement with traders continue to offer various dutiable homo-PP origins at $990/t CFR China, LC AS term, yet trade remains disappointed. Meanwhile, a trader active in the PE market reported, “We managed to close some imported PE deals in this week and today we focus on selling in domestic market instead. We are not very satisfied with the current state of demand in spite of limited LLDPE film supply. And market is entering traditional slow season, and this might further drag down demand condition.”

In the production status update, Inner Mongolia ChinaCoal Mengda New Energy & Chemical Industry Co Ltd (Zhongmei Mengda Chemical) has offered commercial cargoes for coal based LLDPE (7042 grade) to domestic market as of today. Earlier this week the company has also reportedly achieved on-spec olefins output from its newly started up plant and commercial sales for coal based PP parcels.

In Southeast Asia, the quiet sentiment has not seen any improvement today and there is very limited number of deals reported. Few new homo-PP offers emerged to the market at diverged direction, which creates confusion among market players. A buyers purchased Middle Eastern homo-PP at $1030/t CIF Vietnam, LC AS term, some $20/t lower than the initial offer levels said, “We requested for 300 tons cargoes, however, our supplier only can fulfil 88 tons for now. General overseas supply remained tight and that’s why we believe that market would follow mostly stable trend in the near term.”

Meanwhile, another major Middle Eastern producer announced new homo-PP prices at $1140/t with the same term, claiming limited allocation. Buyers become even more puzzle when Chinese coal-based PP appears at $10-20/t lower than at the beginning of the week at $1000/t CIF SEA term. A regional buyer firmly stated his opinion, “With the current firming energy and propylene costs, we are not expecting any significant drop in PP prices in the near term. Some of our PP block copolymer suppliers informed us that they are skipping offering this week and planning to lift prices in the coming days. However, demand in local market is very weak and producer’s attempt to lift prices might face stiff resistance.”

In the PE market, offers at the higher end of the overall market range are now seeing difficulties in concluding deals and some sellers already stepped back from their initial offers. A Thai producer reported, “We couldn’t managed any sales after cutting HDPE offers to Vietnam by $10/t yesterday. We are now collecting bid from customers for another $20/t reduction. Demand is weak as most players are going off for holidays, which mean we might only see more activities next week.”

Another buyer in the country received Middle Eastern LLDPE film at $10/t lower than last week at $1270/t CIF Vietnam, but still in the process of negotiation as local prices are currently lower than this level. Meanwhile, a major local producer in Malaysia elected to maintain domestic prices unchanged from last month with a buyer said, “We prefer to stay conservative with expectation that market might continue to follow softening trend in June due to fasting month. Demand for our end product is not as strong as expected, hence we are not in rush to make additional purchases.”    

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