Asia Daily PP and PE Overview 05 July 2016

In China, futures prices on Dalian Commodity Exchange extended the firming trend, which has been in place for almost four weeks in a row today. September delivery contract for PP inched up CNY77/ton ($12/ton) while LLDPE jumped CNY205/ton ($31/ton) from the previous trading session. Both contract settled at CNY8365/ton ($1072/ton without VAT) and CNY9515/ton ($1219/ton without VAT) respectively.

Physical spot market continues to journey north with the support from persistent firming trend in futures trading. Fresh price lists showed CNY200/ton ($30/ton) increased for PP and CNY100/ton ($15/ton) for PE compared to yesterday. Demand, however, is subsiding as a natural respond to an over-stretched market, sources said. A packaging manufacturer concerned, “Our end product business is still amid slow season, hence we restrain from making fresh purchases, but utilizing on hand inventories instead. Most of our domestic suppliers are holding very firm on their cargoes with expectation of seeing higher prices in the near term.”

Players reported seeing tightened HDPE yarn supply in the country, which encourages traders to lift prices for Indian origin cargoes by $20/ton from last week to reach $1190/ton CFR China, LC AS term. A trader in Guangdong commented, “The current tightness might only be temporary as Iranian cargoes might re-emerge after the Eid al-Fitr holidays. We plan to be more cautious in the coming weeks though room for further price increment is still available in small range.”

Import homo-PP remain unchanged from the earlier trading day, however, buying interest is not as strong as desired with stiff resistance from buyers towards prices at the upper end of the overall price range.

In Southeast Asia, market remains on the firming trend as several major suppliers announced fresh offers with increases from last week. There are more activities observed in the regional PE market, especially the Vietnamese LLDPE film sector. Indeed, offers for Indonesian LLDPE film continue to move higher in the country as the week proceed, totalling some $20-35/ton hike from last week to reach $1220-1240/ton CIF, LC AS term. Source from a supplier informed, “Buyers are not showing immediate respond after received the new prices and we think market might take some time to accept higher levels. We have sold out July cargoes and currently offering for August delivery. This could be a minus point given the uncertainties associated with the long shipment parcels.” Buyers in the country are caught with surprise due to such rapid price increment and most are in the state of consideration whether to make fresh replenishment. However, players are not expressing any expectation for a reversed trend in the near term considering strong upstream values and the supply condition.

Other markets in the region including Philippines and Malaysia are seeing ease in domestic LLDPE film supply with the return of local producers after shutdowns. A Malaysian converter reported, “Local traders informed us that they are having ready cargoes on hand to deliver immediately, just the import supply remain limited, especially from Singapore due to unexpected shutdown at one of the major plant. Despite improved supply condition, we think market might maintain the firm stance in the coming days.”      

The HDPE market has also gained support from firming ethylene costs, and many believed to be the spillover effect from the LLDPE film uptrend. A Thailand producer said, “We have sold the last HDPE blow molding cargoes for July delivery at slightly higher levels. We might open offers for August shipment in the near term and we are looking at firmer prices considering the current market situation.”

The regional PP market sees relatively limited new offers at mostly higher levels reported in the earlier week. A major Korean producer rocked Vietnam market with $150/ton hike in their latest offer compared to last month to reach $1130/ton for homo-PP cargoes. A buyer commented, “We decided to hold our purchases since we feel the risk associated with the latest offers is rather high. Indeed, we are looking at the number of lower cost cargoes arriving in August-September period, which might ease local supply drastically. For that, we prefer to take more cautious stance.”

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