Asia Daily PP PE Report 10 May 2016

In China, futures prices on Dalian Commodity Exchange recorded an upswing on the second trading session of the week with both contracts settled higher. PP contract for September delivery grind out increases of CNY49/ton ($2/t) at CNY6593/ton ($865/ton without VAT). LLDPE contract meanwhile see larger hike of CNY130/ton ($20/ton) to close at CNY8095/ton ($1060/ton without VAT).

Sentiment in domestic spot market witness some improvement in line with the rebound seen in futures trading, however, both PP and PE prices continue to go down CNY50/ton ($8/ton) compared to yesterday. A trader in Xiamen commented, “Domestic sale is satisfactory today for us and if this trend continues in the coming days, market would be able to digest some of local inventories. We hope with this, the softening trend might be suspended and market would be stabilised.”

Another trader in Dongguan confronted, “Futures market has only firmed up for one day and it might be a wiser choice to remain wait and see. We are holding back our PP cargoes to avoid any further price erosion, bearing in mind that May and June could be tough months to sell. However, we do hope to see a more sustainable increasing futures market trend, which would provide psychological support for the spot market in the near term.”

In the import market, homo-PP prices remain unchanged from the earlier trading day, yet activities are not picking up the same pace as local ground. Traders continue to express intention to expand businesses to the near-by Southeast Asia market with a source said, “We plan to penetrate Southeast Asia market with Chinese PP cargoes and we might be more active by second half of the year. At the moment we are monitoring market development and collecting buy idea for the coming months.” Import HDPE film continues to be under pressure with Saudi Arabia origin reportedly breached below $1100/t level to reach $1080/t CFR China, LC 90 days term. Players are expecting a more stable trend in the near term, at the meantime holding cautious stance when discussing fresh purchases.

In Southeast Asia, trading activities have not seen much improvement as the week proceeding with prices at the upper end of the overall range are facing stiff buyer resistance. Regional traders are especially showing reluctance in making fresh replenishment from import market citing uncertain outlook. A Vietnamese trader purchased local homo-PP cargoes at approximate $1040/ton FD Vietnam, excluding VAT, cash in advance said, “This price level is more competitive than import cargoes at the moment and caught buyer’s attention. We think the supplier is facing difficulties in exporting to other regional markets, which encouraged more aggressive move in domestic ground. Today, the supplier has lifted offer by VND200,000/ton ($9/ton) compared to yesterday after they sold off 1500 tons of material, yet market is still doubting the sustainability of firming trend.”

There is very few import homo-PP offers emerged in Southeast Asia market today at relatively stable levels. Buyers are waiting for major Middle Eastern to announce new prices with many players are expecting stable to soft trend from last month. A converter from Indonesia received Indian homo-PP at $1050/t CIF term said, “The gap between offers for Indian cargoes in China and Indonesia has reached $100/ton and we think this trend is not sustainable. Demand in Indonesia is not strong, in fact domestic traders are selling at discount in spite lacking of spot cargoes. Fasting month is around the corner, therefore we prefer to remain conservative in the near term.”

In the PE market, re-export cargoes from China continue to find its ways to Southeast Asia market, especially to Vietnam, however prices are not seeing much changes. A trader received the re-export cargoes said, “HDPE film prices continue to come under pressure in the face of sluggish demand. Many buyers are not willing to take position as they expect further reduction in the coming days,” Meanwhile, players in Malaysia area also showing caution when come to replenishing material with a converter said, “We purchased a small quantity of Korean LLDPE film due to tight domestic supply. We are not expecting any upward price adjustment in the coming week amid visible slower demand.”

In the plant news, Japan's Maruzen plans to shut its 550,000 tons/year cracker from 10 May to 8 July 2016 for scheduled maintenance work. Last Friday, South Korea’s Lotte Chemical Corporation restarted its naphtha-based cracker after 25 days maintenance shutdown. The cracker has a production capacity of 1 million ton/year of ethylene and 480,000 ton/year of propylene.

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