SE Asia PP falls for a fifth consecutive week, but bottom in sight

Author: Leanne Tan


SINGAPORE (ICIS)--Southeast Asian polypropylene (PP) prices fell for a fifth consecutive week in early April, though some market players believe that the spot market is likely to stabilize in the weeks ahead.

PP flat yarn grade all-origin spot prices were last assessed at $1,230-1,290/tonne CFR (cost & freight) southeast (SE) Asia on 6 April, having lost some 2.7% on average since 2 March when prices peaked, ICIS data showed.

PP spot prices had kicked off 2018 on a strong note, mainly driven by tight supply fundamentals and a bullish Chinese market in the first quarter.

Robust demand and better net back in India and Pakistan further curtailed spot availability to southeast Asia, as suppliers directed available allocations to those countries.

The market rally in China started to lose steam by the end of February, as inventory levels started to build up and domestic demand remained subdued after the Lunar New Year holidays in the second half of the month.

Futures prices in the country slumped as the bearish sentiment grew more pronounced, and domestic and import prices in the country followed.

Chinese suppliers began pushing exports into southeast Asia amid an open arbitrage window, with Vietnam as the key target market, and spot prices in the region were on a downtrend for most of March.

However, some market players say that prices could be bottoming out.

China’s PP futures had a strong showing the past two weeks, led by bullish market sentiment in spot market due to the upcoming maintenance season and concerns that production cost for the polymer may rise amid the brewing trade war between the US and China.

Unsurprisingly, spot prices in Vietnam have been the first to respond to the rebound in China.

PP flat yarn grade prices in the country were last assessed at an average of $1,220/tonne CFR Vietnam on 6 April, up $10/tonne from the average prices in the preceding week, according to ICIS data.

Some form of recovery may be on the horizon for the rest of southeast Asia as well, as prices in the region typically closely follow trends in China.

Furthermore, demand typically sees some up-tick among the predominantly Muslim countries in southeast Asia as pre-Eid-ul Fitr buying begins in April.

Eid-ul Fitr is likely to be observed in the second half of the June on the conclusion of the Muslim fasting month of Ramadan, which is expected to begin in the second half of May.

However, most market players deem any steep increases to be improbable, and any gains are likely to be fairly muted, as availability in the regional domestic markets remains ample.

Regional PP supply may also lengthen in the coming weeks as a Thai producer resumes full operations later in April, putting a cap on potential price gains.

Focus article by Leanne Tan