Sentiment rebounds in South Asia polymer markets as crude rises

28 May 2010 09:58  [Source: ICIS news]

SINGAPORE (ICIS news)--Sentiment in South Asian polymer markets rebounded on Friday, buoyed by an overnight rise in crude values which contrasted with a bearish mood earlier in the week, industry sources said.

“We are seeing a great improvement in buying interest, as there seems to be a perception that prices may have bottomed,” a polypropylene (PP) trader in Mumbai said.

Converters with depleted inventories were rushing to stock up before prices start to increase, an Indian polyethylene (PE) end user said.

“Supply of most PE grades, with the exception of high density PE (HDPE) film, is balanced and inventories are quite low at the moment,” he added.

Buyers were also concerned that if the Indian rupee -that depreciated close to 10% versus the US dollar since early May - begins to rebound, import cargoes may become more expensive.

Meanwhile in Pakistan, buying interest also picked up, with distributors saying that they had managed to sell most of their cargoes at reduced prices.

So downbeat was the mood in the Indian and Pakistani markets earlier this week that major exporters had slashed offers for June PE and PP cargoes into the two regions by 6%, with add-in “price protection”.

Indian producers even reduced domestic prices by Indian rupees (Rs) 2-3/kg ($0.04-0.06/kg) for PE and Rs2/kg for PP in a bid to stimulate buying activity.

The efforts paid off on Friday, with buyers responding positively to the assurance from suppliers that prices would be adjusted down to prevailing market levels at the time of delivery under the “price protection” scheme.

June parcels of PP raffia were heard traded on Friday at $1,270-1,280/tonne CFR (cost and freight) in Pakistan and $1,320-1,340/tonne CFR India, traders said.

HDPE film was transacted at $1,230-1,250/tonne CFR India and $1,150-1,200/tonne CFR Pakistan. Linear low density PE (LLDPE) was discussed at $1,240-1,300/tonne CFR Pakistan and $1,300-1,340/tonne CFR India.

HDPE film is more dense than LLDPE and is used mainly to make shopping bags and for food, drink and cosmetic packaging. LLDPE film, on the other hand, is used as a liner in shrink wrap, and for drip irrigation. PP is used in packaging and automotive applications.

($1 = Rs46.6)

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By: Prema Viswanathan
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