Asia Daily PP and PE Overview 08 July 2016

In China, futures prices on Dalian Commodity Exchange unexpectedly turn south on the last trading day of the week at the fastest pace recorded in nearly four weeks. September delivery contract for PP plunged CNY277/ton ($34/ton) while LLDPE nosedived as much as CNY435/ton ($65/ton) from the previous trading session. Both contract settled at CNY8097/ton ($1034/ton without VAT) and CNY9010/ton ($1151/ton without VAT) respectively.

Domestic spot market immediately responded to the tumbling future trade with fresh offers indicated CNY200/ton ($30/ton) dropped from yesterday for both PP and PE cargoes. Players reported seeing minimal trading activities as buyers retreated to the side-line to wait for clearer signs of the market direction. A trader from Beijing said, “Converters withdraw from the market and traders are giving larger than usual discount now that the arbitrage window between spot and future trade has closed. If future market continues to weaken in the next trading sessions, chances that domestic ground might witness mass reduction are very high. We hold conservative stance at the moment.”

Several converters contacted by CommoPlast also reported receiving new offers at downward adjustment of CNY200/ton ($30/ton), yet decided to wait a little longer before commit new purchases. Import market, on the other hand, remains relatively stable, however, falling local prices could imply a tough bumper for further price increment in the near term. A trade sold Saudi Arabia homo-PP at $1020/ton CFR China, LC 90 days term yesterday said, “We think market just need to catch a breath before it gains more solid support from the demand side to firm up further in the coming month. At the moment, it is important to monitor the next development on Dalian Commodity Exchange.”

Players in the import PE market still hold firm to the fact that there is very limited availability, especially from Middle Eastern and Singaporean suppliers. This, alongside with firming ethylene costs might act as a primary factor holding the market on the current trend in the near term.     

In Southeast Asia, there are very limited trading activities on the last trading day of the week while part of the region is still off for Ramadan. Most sellers announced new prices in the past couple of days are reportedly settled deals at stable to slightly lower levels from initial offers. A major Middle Eastern producer open fresh homo-PP offers to Vietnam at $50-60/ton higher than last month to reach $1070/ton CIF, LC AS term. A buyer received the new offer commented, “Our supplier is collecting bid from buyer at $30/ton lower than initial offers, however, we decided not to proceed with purchase due to lack of confidence in the medium term outlook. Propylene monomers costs have not changed while demand from converter is rather sluggish, for this, we think PP market is really lack of fundamental support to firm up significantly.”

Meanwhile, other buyers are still having better than expected purchasing appetite, in which several deals for Saudi Arabia homo-PP at $1050/ton, CIF Vietnam, LC AS term were reported. Domestic market remains healthy as limited availability is pushing prices higher. This condition is expected to last till early next month when more cargoes arrived the market, sources said.

The regional PE market also remains very firm with a Thailand producer decided to lift HDPE prices for August delivery by $35-40/ton compared to last week to reach $1185/ton for film, injection and blow molding, and at $1190/ton for yarn grades, all based on CIF Vietnam, LC AS term. Source from the producer informed, “We have very limited allocation this month, and hence we only offer to regular converter customers. Initial market respond was not as good as expected, yet we believed buyers would eventually accept higher levels.”

Meanwhile, several converters active in exporting end products to Europe reported seeing regular orders from non-UK customers; yet many others received order cancelations or postponement from buyers within UK given weakening Britain Pound and uncertain economic outlook after the Brexit.

Several regional crackers enter maintenance shutdown season starting August is expected to retain the strength of the ethylene market in the near term, which in turn might support the PE prices. However, regional players are now watching further development in the nearby China market after future prices recorded steepest fall for the first time in nearly four weeks today.

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