FocusIndia PP, PE edge up from 5-year lows

18 November 2008 05:44  [Source: ICIS news]

By Prema Viswanathan

 

SINGAPORE (ICIS news)--Prices of polypropylene (PP) and polyethylene (PE) imports into India have edged up from five-year lows as buyers returned to rebuild depleted stocks, signalling the market has finally bottomed, suppliers, traders and end users said on Tuesday.

 

Market players believed prices had plunged to unsustainable levels, with PP and PE values having declined 65-70% in a span of just four months.

 

But the recovery may be short-lived, lasting probably until the first quarter of 2009, when the Indian market would once again see surplus supply as new Middle East PP and PE capacities start up, they said.

 

Prices of raffia grade PP and film grade high density PE (HDPE) were assessed last Friday at $600-700/tonne (€474-553/tonne) CFR (cost and freight) India and $680-730/tonne CFR India, respectively, by global chemical market intelligence service, ICIS pricing.

 

The resurgence in buying activity brought cheer to market players in India. “It’s good to see consumer confidence make a comeback, as Indian buyers had been keeping away from the market for several months due to uncertainty about when prices would bottom,” said a Mumbai-based polymer trader.

 

“The market is bullish. Last week, I managed to secure a cargo of raffia grade PP at $600/tonne CFR India at a special discounted rate to compensate for my earlier losses, but this week I can’t find any supplier willing to sell me a cargo although I am willing to pay $670/tonne CFR India,” a Mumbai-based PP converter said.

 

A PP supplier which had concluded business at $670/tonne CFR India late last week said it had withdrawn all offers and was looking to raise its offers this week.

 

“The general perception is that there will be no PP raffia offer below $730-750/tonne CFR India this week, while PP film will be $30/tonne higher,” said a Delhi-based polymer trader.

 

Tight supply and low customer inventories were the main factors boosting the buying sentiment, traders said. Reliance Industries’ shutdown at its 1m tonne/year PP plant at Jamnagar, in India’s Gujarat state, in late October, restricted availability.

 

“Although one of the four lines at the Jamnagar PP complex has started up, and the other three are expected to start up over the next few weeks, buyers are afraid they will miss the boat if they don’t buy now,” said the Mumbai-based trader.

 

A pick-up in orders from retail customers has also helped strengthen market sentiment, an export-oriented end-user said. “I am now getting more orders from my customers in the US and even Europe, despite the recessionary trends, as they are worried that prices will rise further if they hold back,” the converter said.

 

The strengthening of the US dollar against the Indian rupee in recent weeks has also helped export-oriented converters like him to manage their margins, he added.

 

The Indian PE market also saw a similar rebound, as strengthening demand and tightening supply due to production cutbacks prompted buyers to re-enter the market, causing prices to rise.

 

“High density (PE) offers into India are now heard at $700-750/tonne CFR, up from $680-730/tonne CFR last week,” the Delhi-based trader said.

 

Supply was limited as due to a five-day shutdown at Gail India’s HDPE plant at Pata, in Uttar Pradesh state in early November.There were also unconfirmed reports that another polymer producer had reduced operating rates at its PE and PP plants.

 

($1 = €0.79)

 

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By: Prema Viswanathan
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