SE Asia PP prices at 30-month high amid tight global supply

SINGAPORE (ICIS)–Southeast Asia’s polypropylene (PP) spot prices are at a 30-month high amid tight global spot supply of the material.

Spot numbers have been firming over the course of December and January on the back of healthy restocking activity in China ahead of the Lunar New Year holidays in mid-February.

A bullish import market in China helped to provide support to spot prices in southeast Asia, with all-origins spot PP flat yarn grade prices on 2 February assessed at an average of $1,270/tonne CFR (cost & freight) SE (southeast) Asia, the highest level since mid-2015, according to ICIS data.

The Vietnamese market saw some of the steepest gains in the ASEAN region, having little domestic PP production capacities and being mostly reliant on imports. Spot prices of flat yarn grade in Vietnam were at an average of $1,255/tonne CFR Vietnam on 2 February.

The global spot market remains short, with many suppliers having sold out allocations for the month quicker than usual, with sales for the bulk of February shipment volumes already wrapped up in the past week.

Other suppliers withheld offers, pulling back from the southeast Asian spot market in order to capitalise on better netbacks in other regions.

In January, there were pockets of spot demand in Japan, with Japan Polypropylene Corp’s (JPP) 300,000 tonnes/year plant remaining shut since September 2017.

As such, some suppliers diverted available spot volumes to the Japanese market instead, where margins were more attractive, further limiting availability in the rest of southeast Asia.

The spot market in southeast Asia was further supported by sentiment-driven buying, with converters in the region procuring spot cargoes to safeguard against further price escalations.

In Vietnam, buying momentum was on an upswing, as converters sought spot volumes for post-holiday requirements.

“Lately, higher prices have been easier to achieve in Vietnam, compared to other southeast Asian countries, so we have been trying to sell more volumes there,” a trader based in Indonesia said.

Market sources were unsure if the current upward pressure on PP prices in the region will persist in the coming weeks.

Supply is expected to remain tight, with several Thai producers set to conduct scheduled maintenance at their plants in February.

However, buying momentum has died down significantly in the first week of February, with the bulk of converters having stocked up on sufficient volumes in January.

Furthermore, demand for finished goods in southeast Asia remains lacklustre.

Focus article by Leanne Tan

Picture: Polypropylene (PP) is used in sacks. (Source: SIPA/REX/Shutterstock)