Southeast Asia PP falls on steep propylene losses, ample supply

SINGAPORE (ICIS)–Southeast Asia’s polypropylene (PP) market is being dragged down by steep losses in feedstock propylene market since late October, amid ample supply and weak regional downstream demand.

A worker prepares rice sacks inCambodia. PP is used in sacks. (Photo by AP/REX/Shutterstock)

Softening prices in the key China market further eroded market confidence in the region, with fresh volumes from South Korea inundating the Chinese import market.

On 16 November, spot PP flat yarn grade prices have fallen by 4.71% since late October to an average of $1,215/tonne CFR (cost & freight) SE Asia, according to ICIS data.

Market sentiment was battered as feedstock propylene prices plummeted.

Propylene prices have gone from the highest in the year to the lowest in the span of just five weeks, stunning downstream PP market players.

Some PP suppliers cut offers in a bid to offload more cargoes amid concerns that spot prices would come under pressure and take the cue from the propylene market.

“Market players are all very nervous. Chinese PP futures have been volatile, crude prices have been softening, regional currencies are still very weak against the US dollar – all these factors have impacted confidence levels,” a southeast Asia-based supplier said.

Converters in the region were becoming increasingly cautious about making fresh procurements amid expectations that upstream prices may continue to slide.

Furthermore, most have previously procured significant volumes for October shipments – buying year-end requirements in advance to ensure the cargoes will arrive within the year.

Buying appetite for dutiable Middle East- and India-origin cargoes with longer shipment times was especially weak, as buyers shunned offers for late-November liftings.

Demand is expected to taper down further in the weeks ahead, as the year-end seasonal lull sets in and as buyers are expected to keep stocks lean toward the end of the year.

Supply looks set to remain ample in contrast, with a steady influx of cargoes from recent start-ups in Vietnam and South Korea.

Focus article by Leanne Tan