South Asia PP market bullish on China gains, tighter supply

SINGAPORE (ICIS)–South Asia’s polypropylene (PP) market remains bullish, propped up by recent recovery in China’s import prices and limited spot supply.

Unplanned outages at some plants have tightened availability of spot cargoes for September.

On 24 August, PP raffia/injection prices were assessed at $1,230-1,250/tonne CFR (cost & freight) India, up $10/tonne week on week, according to ICIS.

In Pakistan, prices were unchanged at $1,220-1,240/tonne CFR Pakistan, as markets were closed for the Eid ul-Adha holiday last week, the data showed.

Supply from India has been hit, following an unexpected outage in August at a major facility in the country.

Although the disruption is at an export-oriented PP facility, market sources said the outage could translate to stronger demand from PP buyers that mainly re-export their output and affect supply to the Indian domestic market.

In the Gulf Cooperation Council (GCC), a major producer was facing upstream production issues that has affected its September supply, according to market sources. This could not be immediately confirmed with the supplier.

Most GCC producers are sold out of August allocations before the Hajj and Eid ul-Adha holidays in the region last week, and are set to announce their September offers later this week.

Importers in India and Pakistan acknowledged that prices for August shipments were no longer available.

“No GCC supplier is willing to offer $1,220-1,230/tonne CFR India anymore for September,” an Indian importer said.

Acceptable buying levels among Indian processors also rose to $1,250/tonne CFR India in view of a generally firmer sentiment for September.

An expected replenishing of stocks following an almost two-month market lull supports the firmer outlook for September PP prices in Pakistan.

Demand in Pakistan has been weak since July – before its general elections, as importers waited for greater economic and political clarity to follow after.

A steep depreciation in the Pakistani rupee against the US dollar has rendered imports expensive.

“Import prices in China have gone up in the last two to three weeks, so there doesn’t seem to be much pressure on sellers to sell for September at August levels,” a Pakistan-based PP processor said.

In China, prices in the PP futures market have remained volatile, casting uncertainty on near-term sustainability of price uptrend in the spot market.

China is generally moving in the direction of PP self-sufficiency in the longer term, and this would affect the behaviour of spot import prices.

“We need to see how long Chinese PP import prices move up, because China continues to depend on domestic production to meet the bulk of its requirement,” an Indian PP buyer said.

A continued slowdown in demand from Turkey, a key PP market in Europe, amid weakness in its currency – the lira – is also likely weigh on Asia’s PP prices.

Focus article by Veena Pathare

Picture: Spices and pulses including lentils and rice in sacks in Rajasthan, Western India. Polypropylene (PP) is used in sacks. (Photographer: Tim Graham/robertharding/REX/Shutterstock)