Asia Daily PP and PE Overview 30 May 2016

In China, futures prices on Dalian Commodity Exchange start the new week on a firm note with contract 1609 for PP surged CNY176/ton ($27/ton) from last session to closed at CNY6587/ton ($854/ton without VAT). Contract for LLDPE advance CNY145/ton ($22/ton) to reach CNY8025/ton ($1041/ton without VAT).

Firming futures trade continue to support domestic spot offers as fresh price lists indicate some CNY50/ton ($8/ton) hike on PP cargoes. There are a good number of deals reported in the local PP market while players continue to complain about limited homo-PP raffia supply. Domestic PE offer on the other hand decline similar amount on sluggish buying interest. A trader from Xiamen commented, “Lacking of inventories pressure is supporting stable to firm trend in domestic market, however, our concern is the sustainability of the current trend amid mediocre demand. Even demand in Southeast Asia market is slowing down which might limit the re-export opportunity.”   

Players are generally very cautious about June prospect with expectation of slower demand during the first week of the month given the Dragon Boat Festival from 9 to 11 June 2016. A converter from Fujian added, “We will need to replenish some cargoes within these two weeks, however, we plan to only buy hand to mouth since there is minimal supporting factors for a rebound. We are operating at reduced rate as demand for our end product is rather slow now.”

Import homo-PP from dutiable origin remain relatively stable from last week stemming from seller’s determination to hold firm on their limited number of cargoes. However, some discounts are generally expected in the coming months. Players in the PE market are blaming stronger US dollars and falling upstream costs to be the main factors discouraging buying appetite for import parcels. A trader reported, “We are selling imported HDPE cargoes at loses in domestic market to compete with competitive local material. We see import HDPE from Iran is heading lower especially when demand and costs are not giving support.”

In Southeast Asia, sentiment is quiet on the first trading day of the week as buyers remain cautious about the near term outlook despite seller willingness to negotiate on deal. Import homo-PP from Saudi Arabia to Vietnam breached below the $950/ton threshold at $940/ton CIF, LC AS term. A buyer received the offer explained that the price is only for homo-PP injection grade and is given to selective customers while adding, “This offer indicates $20/ton reduction from last week done-deal for the same cargoes. We prefer to monitor further development in the upstream market before taking position, as we believed that with several propylene plants restart this week, the supply would improve in the coming month. Besides, continuous falling local prices give us no confident in making large purchases.”

Other regional suppliers reportedly hold very firm stance on their cargoes expecting upcoming shutdown at major Southeast Asian plant would keep non-dutiable cargoes limited. An Indonesian buyer received Vietnamese homo-PP at $1060/ton CIF, LC AS term informed, “Our supplier refused to give any discount though we placed bid at $30/ton to purchase some quantity. Demand for our end product is regular at the moment, however we prefer to wait a bit longer hoping to achieve deal at our buy idea level.”

In the PE market, ethylene costs based on CFR Southeast Asia term fell $30/ton on an average compared to a week earlier and putting pressure on the downstream PE market. A regional buyer reported, “Our supplier is willing to give us attractive discount for prompt Middle East LLDPE film cargoes at $1140/ton CIF Vietnam, LC AS term and we are considering the purchase as supply for this grade is rather limited. We only concern about the domestic market condition as monsoon season has had local traders slipped off the supply-demand balance and slashing prices too quickly.”

Players are not showing great optimism for June outlook with expectation that fasting month would limit end product demand. However, many are hoping to see better market condition in second half of July with a source explained, “Producers might be under pressure to deplete cargoes in June before the Ramadan holidays, for this, market might be caught in supply tightness once the holidays are over.”

In the Plant Status news, Thailand’s PTT reportedly restarted its cracker after a brief shutdown last week due to lightning strike, sources reported. The company is planning 15 days maintenance shutdown at one of its HDPE line at the beginning of June 2016.

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