Asia’s polypropylene (PP) import prices may increase in the third quarter as buyers are expected to replenish their stocks. Most importers have been buying on the basis of need, to prevent an inventory build-up, as they were expecting downward pressure on prices when fresh supply becomes available in the region in the near term.
In China, the joint-venture PP plants of Sinopec and SK Energy are expected to start up in end-May, while Sichuan Petrochemical is due to commence production at its plants in July. PP prices are also likely to take the cue from crude oil prices, which are showing some stability. A typically stronger downstream demand in July/August could nudge polyolefin prices upward. But any PP price increases in the third quarter are likely to be moderate as downstream demand in China is still weak, industry sources said.
PP prices in the Middle East and South Asia decreased significantly in the second quarter of 2013 amid weakening feedstock prices and softening downstream demand in the Chinese and European markets. End-users in India said that in the third quarter they may purchase local material because of lower list prices, the volatile rupee and higher import duties. Middle East and Pakistani end-users said they do not expect demand to improve significantly ahead of the Muslim fasting month of Ramadan, because of expected weak consumer spending.
June PP prices may increase in Europe because production has been cut back. May demand has improved as buyers believe prices had reached the bottom of the current cycle. Any upturn is expected to be short-lived as fundamental conditions are unchanged and July and August demand is expected to be weak. Production will remain reduced to accommodate poor demand.
Africa PP prices faced upward pressure in the latter part of the second quarter, as buyers with low inventories sought to restock. The summer months traditionally see demand and prices pick up, and in countries with huge Muslim populations, participants are keen to replenish stocks before Ramadan in July. However, the extent of any Africa PP price increases during the summer will largely depend on the prices of Brent crude oil and Asian naphtha.
After dropping by 1 cent/lb for May, following the settlement of the US May propylene contract, US PP prices are expected to stabilise in the third-quarter. Demand is strong as much of the market has returned from the sidelines after staying out during a 21 cent/lb price run-up from December 2012 through February. Market sources are predicting a slight increase in prices as early as June. However, much of the market expects relatively stable pricing through the balance of the year, with moves of only a few cents/lb up or down each month.
In the American continent, PP markets appear to be on the verge of starting a recovery, after three consecutive declines of the propylene contract in the US Gulf. In Latin America, prices had not declined by much in countries such as Brazil and Argentina, because those markets are protected with high import tariffs (up to 20% in Brazil).
Updated to mid-May 2013