SINGAPORE (ICIS)--Sluggish underlying demand may continue to weigh on sentiment in the southeast (SE) Asian polypropylene (PP) sector, although curtailed regional availability could provide some support to the spot market.
Typically, demand sees a slight up-swing in the month of October, as converters make resin procurements in preparation of an expected increase in downstream export demand of finished goods as the Christmas festive season approaches.
However, any uptick this year has been below expectations, with users of PP resins receiving fewer orders for downstream finished goods for exports, partly due to a general slowdown in the economy.
The protracted trade war between the US and China has resulted in a slow downstream manufacturing sector across the wider Asia Pacific region.
Key manufacturing purchasing managers' indexes (PMI), a barometer of an economy’s manufacturing activity, across many countries in Asia dipped in September.
Under such poor downstream market conditions, the majority of resin buyers have adopted an as-needed approach to procurements, preferring to keep PP resin stocks lean.
The average year-to-date price of all-origins PP flat yarn in 2019 stands at around $1,096/tonne CFR (cost and freight) SE Asia, some $157/tonne lower than the average price registered in 2018, according to ICIS data.
All-origins PP flat yarn prices were last assessed at $1,040-1,060/tonne CFR SE Asia on the week ended 4 October, stable from the preceding week.
However, curtailed regional supply could provide some support to the spot market in the weeks ahead.
While upstream feedstock availability has mostly stabilized from the recent attacks on Saudi oil facilities, some market players remain concerned that some producers there may have tapped into on-hand inventories in order to fulfill October requirements.
Hence, Saudi suppliers are unlikely to be facing any significant inventory pressures in the near term, providing some support to spot prices for November.
Focus article by Leanne Tan