Asia Daily PP and PE Overview 24 May 2016

In China, futures prices on Dalian Commodity Exchange concluded the second trading day of the week at mixed trend as PP futures extended the loses while LLDPE futures reversed the weakening trend to settled higher. Contract number 1609 for September delivery closed at CNY6343/ton ($828/ton without VAT), some CNY73/ton ($11/ton) lower than yesterday. LLDPE futures meanwhile closed CNY80/ton ($12/ton) higher at CNY7905/ton ($1032/ton without VAT)

Domestic spot PP and PE offers lack behind the firming trend recorded in the futures market with fresh price lists indicate CNY50-100/ton ($8-16/ton) reduction from yesterday. Buyers remain cautious and refraining from making large purchases. A converter in Fujian commented, "Our PP suppliers are holding very firm stance on their cargoes claiming limited availability. We only buy hand to mouth basis due to lack of confidence in the near term market outlook."

Import homo-PP prices remain largely stable, which is opposite the weakening trend in the nearby Southeast Asia market and therefore, price gaps between the two markets are now narrow. A trader from Zhejiang informed, "Due to such narrow gaps between Southeast Asia and China markets, we are not offering any export cargoes at the moment. We think international suppliers are not in rush to cut offers in the absence of inventories pressure. However, more domestic plants restart end of this month would bring more supply to the market, for that we prefer to hold conservative stance for June outlook."

Irregular HDPE cargoes continue to show up in China at relatively competitive price, forming the new lower end of overall import offers range. Players are expecting import PE prices to China to touch the $1000/ton threshold in the coming days.

In Southeast Asia, buyers remain cautious in making fresh purchases with several major producers announced June delivery cargoes at lower levels compared to the last offers. Some PE cargoes emerged at three-digits reductions in line with diminishing regional demand. A Vietnamese buyer received fresh PE offers from a major Saudi Arabia producer at $100-110/ton lower for LLDPE film and $90/ton decreased for HDPE film to reach $1140-1150/ton and $1120/ton respectively. Source commented, “We are placing bid for another $20/ton discount from initial offers at now waiting for the supplier’s feedback. Southern Vietnam is entering monsoon season, hence we expect demand to fall further in the coming days.”  

Demand in Thailand is also witnessing the downtrend with a trader said, “Trading activities are slow even with the shutdown at one of the major local producer. Most of our customers are complaining about weak end product demand, hence they are not in rush to replenish fresh shipments.”

Fading demand is downplaying market prices while inventories levels are seen increasing. Indeed, a regional producer cut LDPE film prices by $30/ton from last week said, “Our buyers are able to obtain Middle East cargoes at more competitive price and we are now facing inventories pressure, June is not so promising to us, therefore we hope to deplete some cargoes in the near term.”

In the PP market, number of deals was observed in Indonesia market as sellers stepped back from initial offer to match buyer’s expectation. A buyer purchased Vietnamese homo-PP at $1050/ton CIF Indonesia, LC AS term said, “We manage to achieve $30/ton discount after negotiation, yet we only buy a small quantity. Domestic market has seen more than $150/ton reduction on homo-PP cargoes in the past three week. Therefore, we believed that market still has room to move lower.”

In Vietnam, import homo-PP continues to see minor reduction on the second trading day of the week. Southeast Asia homo-PP offers slid another $10-20/ton to reach $980-990/ton CIF Vietnam, LC AS term. A trader said, “We are not very confident about the near term outlook, therefore we might wait a little longer before procure any cargoes.”

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