Asia Daily PP and PE Overview 01 July 2016

In China, PP futures prices on Dalian Commodity Exchange retreat for the first time in almost three weeks, though the extent of reduction is rather limited. Contract 1609 settled CNY74/ton ($11/ton) lower at CNY8007/ton ($1028/ton without VAT) for PP. LLDPE futures meanwhile rebounded from the past two loosing sessions to add CNY25/ton ($4/ton) to reach CNY9055/ton ($1162/ton without VAT).

Domestic market has not responded so promptly to the futures trading recently, as fresh price lists from local makers showed another CNY50-150/ton ($8-23/ton) hike on spot PP cargoes while PE prices remain mostly stable. Players attributed the firming trend in local market to the lack of inventories pressure from major producers during the beginning of the month. However, players are seemingly taking a break to monitor further movement on Dalian Commodity Exchange before making the next move. A trader in Dalian commented, “PP futures fell after a long rally is like choking the market. Many players are now feeling uncertain of what would be next in the coming weeks, which encouraged them to take more cautious stance. We are still not so comfortable with the fact that local inventories are mostly on traders’ hands.” The source added that he has no plan to reduce prices in large range given support from the general firm trend.

In the import market, it is interesting to see Middle Eastern homo-PP cargoes concluded at $990/ton CFR China, LC AS term, which is considered as a preliminary sign of strong market resistance towards prices above $1000/ton threshold. A trader offering the same cargoes at $1030/ton CFR China, LC 90 days term concurred, “We could only sell minimal quantity, yet we are not in rush to reduce our offer since we are not holding high inventories.”

Import PE market remains strong in spite of slow trade amid traditional weak demand season from packaging industry. It is reported that many converters in agricultural film sector is operating at only 40% capacity while others in packaging film is running at 60-70% rate. Traders are reporting lack of Middle Eastern supply ahead of the long Eid al-Fitr holidays with a source said, “We think this would remain the primary factor support the current firm trend in July.”     

In Southeast Asia, market sentiment remains strong on the last trading day of the week though Indonesian players have officially off for the Ramadan holidays. Players reported seeing very limited number of new offers emerged as suppliers have either sold out their available allocation or having very limited quantity. A Vietnamese converter received Middle Eastern homo-PP offers at $1050/ton CIF, LC AS term, some $30-40/ton higher than the previous offer said, “Our supplier only offered to selective converters claiming limited allocation; however, we did not proceed further with the purchases as this price is way above our acceptance levels. Demand for our end product is a little sluggish at the moment, and we hope businesses to improve by end of Q3.”

The persistent firming trend in the regional PP market over the past 4-5 weeks has started to arouse questions about the sustainability amongst industry players. A trader said, “Our concern is that end product business is rather stagnant and would buyers continue to accept higher prices amid softening upstream costs. We have temporary suspended fresh purchases to monitor further development before taking position.”

The PE market has not been as active in the absence of new offers from regular suppliers. Buying interest for Indonesia LLDPE film continues to gain speed in Vietnam with offers added another $15/ton from yesterday to reach $1220/ton CIF, LC AS term. A trader sold the cargoes said; “We managed to conclude deal yesterday at offered levels. Buyers are showing strong interest for LLDPE film cargoes, hence we think market might sustain the firming trend in the coming days, especially with the support of increasing ethylene costs.”

On an average, ethylene monomers based on CFR Southeast Asia has firmed up $25/ton week on week basis, due to healthier downstream demand and some unexpected plant issues.

In the regional local markets, Vietnamese players report seeing limited supply for certain HDPE film grades, which is pushing domestic prices higher towards the end of the week. A trader commented, “Many domestic sellers have stopped offering some Middle Eastern HDPE film grades due to lack of availability. We think local market might be able to extend the firming trend in the coming week.”

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