Asia Daily PP and PE Overview 17 June 2016

In China, futures prices on Dalian Commodity Exchange extended the firming trend on the last trading day of the week with both contract recorded another three digits hike. September delivery contract for PP gain CNY173/ton ($26/ton) at CNY7065/ton ($916/ton without VAT) while LLDPE contract added CNY195/ton ($30/ton) to settle at CNY8650/ton ($1122/ton without VAT)

However, the strong sentiment observed in the domestic market earlier this week appears to be loosing steam with weaker buying activities. Indeed, price lists for spot PP and PE from major local producers remain unchanged in spite of impressive hike recorded in the futures trading. A trader in Shandong reported, “We received large number of inquiries today, mostly to check on the latest offers as futures market rise steeply. The number of actually deals in contrast is very limited. We think that buyers have already stocked up comfortably, hence market might need minor correction in the coming week.”

In the import market, a Middle Eastern producer reportedly withdrew PE offers from the market, drawing wide speculation of possible price hike in the coming days. A trader in Guangdong added, “There is high level of uncertainly associate with the medium term outlook, for that, our customers are becoming very reluctant to make fresh purchases. We received bid for Middle Eastern PE cargoes at $60/ton below the initial offers, which we are not intent to accept.” Optimistic traders are discussing about the positive demand prospect in July-August, as buyers might need to replenish another round of inventories to avoid disruption during the G20 Summit. Import homo-PP to China has not changed on the final trading session this week.     

In Southeast Asia, the firm sentiment persists on the last trading day of the week, however, the number of deals concluded become smaller as buyers wary about the impact of continuous falling energy market. Market is also paying close attention to the result of the Britain votes to exit Europe, which players expected to influence the macro environment.

There is very limited number of fresh PP offers available in the market today, while Indonesian buyers appear to be making final purchases before the long Ramadan holidays. A converter procured Thailand homo-PP at $1060/ton CIF Indonesia, LC AS term said, “Our major Saudi Arabia producer is not offering this week and we could not obtain any discount from other SEA suppliers given lack of availability. Our stock is now sufficient till August, hence we might adopt wait and see stance in the near term.” However, demand in Indonesia is expected to moderate in the coming week as buyers are preparing to go odd for holidays.  

Meanwhile, Vietnamese buyers mostly claimed to have sufficient material and now waiting on the sideline to monitor further development. A buyer received offer for Chinese coal based PP at $990/ton CIF Vietnam, LC AS term commented; “We feel a little tweak with the recent downturn in the energy market, hence we skip all PP purchases this week. Domestic market remains largely stable, yet we prefer to be cautious.”

Regional PE market is more of quiet since major producers have yet to announce new offers for July delivery. Players continue to express firmer expectation for LLDPE and LDPE film offers based on justification of tight availability. Vietnamese buyers meanwhile reported seeing more Indonesian LLDPE film offers today at $1160-1170/ton CIF, LC AS term. A trader commented, “We received bids from buyers at $30/ton lower than initial offers, however, we are not planning to accept such low levels since several deals were concluded at $1160/ton already. Demand for this grade is good, hence we believed that market still has room to move higher in the near term.”

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