Local PE market in Vietnam, Indonesia softened despite strong energy complex

The energy complex on international benchmark has been surging over the past several sessions on assured expectation that OPEC would extend the output cut agreement beyond March next year. Players in the petrochemical industry have been putting bullish forecast on the regional market, however the actual outcome is rather disappointed.

It is reported that local HDPE and LLDPE film offers in both Indonesia and Vietnam posted small to moderate drop compared to last week, defeating market expectation for a more stable to firmer trend. In fact, local traders in Indonesia implemented a reduction of IDR200,000-300,000/ton ($15-22/ton) on LLDPE film cargoes even with unchanged price list from a major domestic producer. Cash payment offers for locally produced LLDPE film has reached IDR17,000,000/ton ($1255/ton) FD Indonesia, without VAT. “We decided to make restock some quantity as prices are relatively competitive. Term payment offers are only IDR200,000/ton (15/ton) higher.”

Meanwhile, in Vietnam, the tightness in HDPE film supply does not help in keeping the firming trend in place. Local traders started offering discount for locally held HDPE film parcels by VND200,000-300,000/ton ($9-13/ton) week on week. A trader closed deals for Thailand HDPE film at VND31,000,000/ton ($1240/ton without VAT), FD Vietnam, cash term said, “We used to sell at VND300,000/ton ($13/ton) higher in the previous week. Market is loosing momentum due to the arrival of previously purchased cargoes. We are not very optimistic about the near term outlook.”

Offers for LLDPE film in local Vietnam have also softened slightly and with the recent cut in import offers, players are expecting additional reduction in import ground. “Unless demand for Lunar New Year preparation pick up, we are not expecting prices to firm up so soon,” another trader said.

The upsurge in energy prices might not provide a strong support got the market given the current state of demand condition. Players are commenting that such increases in crude prices might be a deja-vu and the speculation migh cool off soon.