Southeast Asia PP may gain on tight supply

By Angeline Soh

SINGAPORE (ICIS)–Spot polypropylene (PP) prices in southeast Asia are likely to increase in the near term, on the back of strong buying momentum towards year end amid tight supply, industry sources said on Thursday.

PP trades are expected to gain further momentum in November, when Christmas-driven factory orders typically begin to pick up, they said.

In Vietnam, the benchmark PP flat yarn domestic prices rose by Vietnamese Dong (d) 300/kg ($0.01/kg) DEL (delivered) last week to d36,500-36,800/kg DEL according to local traders.

In the Philippines, domestic prices of different PP grades rose to peso (Ps) 30.00-36.50Ps/lb ($0.70-0.85/lb) last week, up Ps2.50/lb ($0.06/lb) on a week-on-week basis, traders said.

PP supply in southeast Asia has been tight as a major regional resins producer in Thailand is beset by production problems since August, while another major facility in Indonesia is not running since early October.

Thailand’s HMC Polymers has been running its 300,000 tonne/year polypropylene (PP) plant at reduced rates since August because of reduced propane feedstock supply from PTT Global Chemical (PGC).

Polytama Propindo’s 380,000 tonne/year PP plant in Balongan, West Java has been down since 7 October and would only restart in early November, according to local traders.

Over the past months, trades in southeast Asia had been slow following sharp depreciation of a number of regional currencies that weakened the purchasing power for dollar-denominated commodities in these markets, traders said.

Weak demand at the time prompted stockists in Indonesia to offload inventories at lower prices to induce buying interest, market sources said.

Demand for resins in the Philippines, Thailand and Vietnam has also been slow because of monsoon rains, which hampered transportation of plastics finished goods, regional traders said.

Consequently, a number of plastics processors in these countries have reduced production to prevent an inventory build-up.

But market conditions are changing – improving demand amid tight supply should nudge up spot domestic PP prices in southeast Asia.

Vietnam’s sole PP producer Binhson Refining & Petrochemical has been preferring to sell cargoes to China and Indonesia, where returns are deemed higher, rather than sell to the domestic market, local stockists said.

The resulting tight supply in the Vietnamese market drove up prices last week, they said.

($1 = d21,083 / $1 = Ps43.1)

Additional reporting by Chow Bee Lin

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections