FocusIndian PP surges by 18% on supply, costs

11 June 2008 05:30  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Prices of polypropylene (PP) imports into India have increased by 18% or $280/tonne in the past month and seem set to rise further on extremely tight supply, surging feedstock costs and strengthening sentiment in China, suppliers, traders and end users said on Wednesday. 

Buyers were unhappy with the price rise as they were finding it increasingly difficult to pass on the high costs to their own end users, they added.

Raffia and injection grade PP was heard sold by a global supplier at $1,860/tonne CFR (cost and freight) India late last week, $280/tonne higher than sales transacted in early May.

"However, the supplier has withdrawn that offer this week, as sales into China were heard above $1,900/tonne CFR," said an Indian PP converter. The converter said it was well covered for the next two months, but was keen on stocking up for fear prices may rise further in the coming months.

A second converter said that its margins were severely squeezed, but it was forced to accept the high offers, as it had to honour its customer commitments. "But we may be forced to bring down operating rates if PP prices continue to surge," it said.

But in a situation of limited availability, suppliers appear to have the upper hand. "Most suppliers into the Indian market have little supply, preferring to target other markets in Asia where they can achieve higher netbacks," a New Delhi-based trader said.

PP suppliers sought to justify the price hikes, citing high feedstock costs.

"Propylene has surged by 17% in the past month to $1,650-1,700/tonne northeast Asia, while naphtha has risen by over 11% to $1,130/tonne CFR Japan," said a supplier.

Market sentiment in India has been boosted by an unprecedented price rally in China triggered by high demand for tents to provide shelter to victims of the Sichuan earthquake and by a cutback in polymer output to divert crude to diesel production.

Lending support to Indian import prices was a surge in domestic prices, which have been hiked four times in the past five weeks.

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By: Prema Viswanathan
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