SE Asia PP market awaits direction from China, upside limited

SINGAPORE (ICIS)–Southeast (SE) Asia’s polypropylene (PP) is waiting for price direction from the key China market after values bottomed out last week, though upside is seen limited due to bearish sentiment.

Last week SE Asia import prices were assessed stable to firm amid limited deals and discussion. PP flat yarn and injection grades inched up by $10-20/tonne, while the other grades held steady, ICIS data shows.

Local traders and converters hold the view that PP prices bottomed out and would be willing to procure some quantities to enhance inventory.

But overall bearish market outlook was expected to cap the price uptrend in the near term. Traders said that converters were reluctant to procure for restocking in view of the persistent slow downstream demand for finished goods.

A price hike would likely keep importers at bay, as the weak demand for raw materials was expected to weigh heavily on the market for the rest of the year.

“My customers may not be interested in negotiation if offers increase by more than $20-30/tonne,” an Indonesia-based trader said.

Market players were waiting for fresh offers for November shipment to be announced by end October.

Some ASEAN suppliers of PP block copolymer grades attempted to raise offers last week but received no responses.

Some traders offered non-dutiable ASEAN PP flat yarn close to $1,100/tonne CFR (cost & freight) SE Asia, and non-dutiable ASEAN PP block copolymer grade at $1,150/tonne CFR SE Asia, up by $20-30/tonne from the previous week.

Buying ideas from customers remained unchanged at mid-$1,000/tonne and low-$1,100/tonne for PP flat yarn and PP block copolymer grades, respectively.

Meanwhile, in China PP prices in the import market rose last week. PP flat yarn of various dutiable origins was traded at $960-980/tonne CFR China, up by $10 from the previous week.

Saudi PP block copolymer grades gained $10-30/tonne as traders and producers sold cargoes at $1,020-1,050/tonne CFR China.

Buying sentiment improved after the National Day holiday over 1-7 October, as some buyers replenished their inventories.

PP prices in China were also supported by increasing international crude oil and propylene prices.

A price hike announced by domestic suppliers in the week also lent further support to higher import PP offers and deals.

Chinese producers lifted offers amid tight supply by Chinese Yuan (CNY) 200-500/tonne EXW/EXWH (ex-works/ex-warehouse), or equivalent of $30-75/tonne.

However, the uptrend in the import PP prices slowed down from midweek in line with decreasing international crude futures.

Most Chinese players said import PP prices would fluctuate slightly in the short term.

High prices might lose ground because of gradually weaker demand and falling domestic PP prices later in the week.

However, some players also believed that there would be limited downward momentum due to tightening supply caused by maintenance shutdowns at several plants in coming months.

India’s Reliance Industries Ltd (RIL) has scheduled a month-long turnaround for two of its Jamnagar-based PP plants starting in mid-November.

There was discussion on maintenance of several Saudi Arabia-based PP plants among market players in China, but details were yet to be confirmed.

Meanwhile the import front in Indonesia was quieter amid subdued discussions in the middle of the month.

Converters were not expected to restock as they were holding comfortable inventory until year end.

“I have sufficient inventory for the rest of the year. I can import some more cargoes up to $1,010/tonne [CFR Indonesia],” a PP flat yarn converter said.

Local traders held firm offers for most grades traded locally in the week, while waiting for further movement from the international market.

But in Vietnam international traders hiked offers last week despite weak buying sentiment. Limited cargoes from Middle East, India and South Africa were available at $1,030-1,040/tonne (cost & freight) Vietnam.

Import discussion was subdued amid limited discussion on the prevailing offers, as traders were unwilling to drop prices close to buying ideas around $1,000/tonne CFR Vietnam.

Local traders and converters would rather take a wait-and-see stance at the moment.

They bought cargoes at $1,000/tonne CFR Vietnam in the previous week in fear for a price increase after Chinese importers returned to the market after Golden Week, and were reluctant to procure more higher-priced cargoes.

“We are awaiting our cargoes to arrive soon, which will enhance local supplies [of imported materials], a Vietnamese trader said.

Buying sentiment for import cargoes weakened in Thailand and Malaysia as the local currencies Thai Baht and Malaysian Ringgit depreciated further against the US dollar last week.

Most converters finished booking their cargoes to cover for October requirements in the previous weeks.

(1$ = CNY 6.75)

(Top Image: Photographer Karl F. Schofmann / imageBROKER/REX/Shutterstock)
Additional reporting by Erin Huang
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

Focus article by Johanna Truong