Asia Daily PP and PE Overview 21 June 2016

In China, Dalian Commodity Exchange rallies for the second day in a row, yet the pace has been slow down as traders cut short profits after drastic jump a day earlier. Contract number 1609 for September delivery added CNY137/ton ($21/ton) for PP to reach CNY7290/ton ($947/ton without VAT) while LLDPE inched up CNY45/ton ($7/ton) at CNY8755/ton ($1137/ton without VAT).

Domestic spot offers for both PP and PE remain resilient, adding another CNY50-100/ton ($8-16/ton) to the latest opening amid moderate purchasing activities, market sources said. On a more pessimistic note, local customers appear to be loosing confidence in the recent futures market rally as they slow down in replenishing cargoes. Partially affecting buying appetite is the fact that many Chinese converters are now in the low seasonal demand for their end products, in which building inventories might mean higher risk than price volatility. A trader in Zhejiang opposed, “We do see smaller number of deal concluded compared to earlier trading days, however, we have yet to spot any sign of possible price correction in the near term given low local inventories.”

Import homo-PP prices from dutiable origins to China has also gain speed with expectation for regular Saudi cargoes to reach $960-970/ton CFR China in the coming days. Players are attributing such increases to tight availability and improved demand condition across the region. A trader said, “There are market talks that material at bonded warehouse has reached $1000/ton threshold, yet buyers are resisting such high price level. From the supply side, we think sellers might be able to hold their firm stance in the coming weeks, yet we feel uncertain about the medium term outlook.”

Meanwhile, tighter supply for HDPE film from Iran, stemming from several plant issues finally encouraged buyers to return for some small intakes. Indeed, after a major Thailand producer lifted HDPE prices to China by $30/ton earlier this week, a good number of deal were reported at $1145/ton CFR China, LC AS term. Traders reported seeing less Middle Eastern cargoes arrival recently due to delay in shipping.

In Southeast Asia, there is a certain level of confusion among players active in PE market after received offers from several makers at diverged trend. However, a good proportion of the market has expressed optimistic expectation for the near term outlook given visible pick up in demand in regional major markets. Indeed, Indonesian traders are seeing better trading activities ahead of the Ramadan holidays season. A source informed, “We have almost achieved sales target for June now, hence we plan to increase domestic offers by at least $20/ton in the next trading session. We expect the current trend to sustain throughout the holidays as the maintenance shutdown season starting August amid stronger demand for ethylene monomers could support the downstream PE market.”

Meanwhile, a major Middle Eastern producer announced July delivery cargoes to Vietnam with increased of $20/ton for HDPE film and $30/ton for LLDPE film cargoes. A market source commented, “Our supplier informed they have very limited allocation for this month, hence they are not expecting any significant discount on deals, especially for LLDPE film. HDPE film meanwhile received less attention even in domestic market, from which we do expect larger markdown.”

In the regional PP market, there are only few new offers observed at slightly higher levels than last week. Players are discussing about such slow pace of price increment, which might indicate a certain degree of seller’s cautious stance and a possible trend of price increase slower-for-longer. A regional buyer received offers for Saudi homo-PP yarn at $1030/ton CIF Vietnam, LC AS term, up $20/ton from last week said, “Our supplier has implied that PP market might keep following the firming trend till end of July. Combined with relatively healthy buying appetite at the near-by China market, we do think this is possible. We are planning to make another small purchase if we can obtain some discounts, however we prefer to be cautious with the new parcels.”

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