Asia Daily PP PE Report 05 May 2016

In China, the plunging futures market has seen slower weakening pace today with contract number 1609 on Dalian Commodity Exchange for PP inched down only CNY4/ton ($1/t) from the previous trading session and LLDPE contract dropped CNY85/ton ($13/t). Both contract for September delivery settled at CNY6815/ton ($895/ton without VAT) and CNY8255/ton ($1085/ton without VAT) respectively.

Smaller drop in futures trading has not released domestic sellers from downward pressure and in fact, price list from local producers showed another CNY50-100/t ($8-15/t) reduction for both spot PP and PE cargoes from yesterday. There are several unexpected shutdown reported in the country this week, however the effect has yet to show. A trader based in Xiamen said, “Domestic trading activities are not encouraging and unless futures market rebound, we might see further downward movement in the near term.”

A converter in Fujian added, “We are switching from homo-PP to other substitutions in making transparent disposal beverage cups and food containers. So far, we found PET to be best suit our cost and quality requirement. Many other converters are doing similarly and this could be one of the factors causing lower demand for homo-PP recently.”

In the import market, sellers are giving discounts with hope to entice buying interest while others are looking for re-export destinations. A trader cut prices for Indian homo-PP parcels by $30/ton compared to last month at $950/t CFR China, LC 90 days term reported, “We managed to close some deals after agreed to another $5/t reduction. Propylene costs are firm but this might not give much support to the market. We are trying to deplete on hand cargoes now.”

In Southeast Asia, trading activities are proceeding slowly as buyers are taking extra caution when it comes to making fresh purchases while Indonesian buyers are away till next week. There are number of deals reported in Vietnam market with larger than usual discounts as an effort sellers made to encourage demand. A distributor sold Middle East HDPE film at $1180 and LLDPE film at $1220/t after agreed to $40 and $20/t discount from initial offer respectively. Source from the distributor commented, “We feel really disappointed with demand this week. Most players are preserving the wait and see stance hoping the return of regional crackers would elevate ethylene supply and bring downward pressure to the downstream PE market.” Players in this market are also blaming the availability of re-export cargoes from China and the presence of irregular origins material at competitive prices to be among the factors pulling sentiment down.

Buyers in Malaysia are showing no less concern regarding fresh purchases after receiving new offers from suppliers. A converter said, “Our suppliers informed that prices might move up further in the near term, however, we are seeing the ceiling amid visible slow down in the near-by China market. The impending fasting month might also dampen demand further. We are having comfortable inventories at the moment, hence in no rush to purchase additional cargoes.”

The regional PP market sees little movement as supply tightness is balanced with the lethargic demand. However, sellers are not in rush to give any significant discount claiming healthy buying interest in other international markets. Buyers on the other hand are having confortable inventories to wait a little longer. A regional converter claimed, “We have more cargoes are arriving for us to sustain production till July. May and June is normally the low seasonal demand for PP and therefore we are expecting further reduction in the near term. We do not expect prices to re-visit the previous low at the beginning of the year, yet we would replenish material if offers hit below $1000/t threshold.”

Players in Philippines are also reporting sluggish sentiment as market is watching the general election results. Demand is expected to weaken further in the coming month with the arrival of the monsoon season.   

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