Indonesia PP imports to face challenge from competitive domestic prices

SINGAPORE (ICIS)–Import activity for polypropylene (PP) to Indonesia is poised to face more challenges going forward, as major local producers cut prices in the domestic market to stimulate buying interest.

Downstream demand remains persistently weak amid buyer caution, as fears of a potential second wave of the pandemic dampened sentiment.

Some market players estimate that year-on-year demand could have dropped by around 30%.

“Producers in Indonesia are running well but downstream demand remains severely curtailed due to the pandemic, leading to an imbalance in demand and supply fundamentals,” a trader said.

Local suppliers sought to move more volumes, concerned that discouraging macroeconomic indicators could further weigh on demand in the last quarter.

A major producer cut offers in the week, with flat yarn grade offered at Indonesian rupiah (Rp) 14,890/kg DEL (delivered) Java.

Sellers in the domestic market were willing to provide even steeper cuts for buyers who were willing to procure larger volumes.

The competitive prices of local production consequently led to muted buying interest for imports.

Even so, import sellers were unyielding to softer prices, with some remaining firm on maintaining offers for August shipment cargoes.

Suppliers of Middle East-origin cargoes were unwillingness to provide any significant discounts, with some noting that they were able to move unsold allocations to the Chinese market where margins were still reasonable.

Dutiable Saudi origin PP flat yarn grade imports offered at $930/tonne CFR (cost & freight) Indonesia elicited no interest from buyers in Indonesia.

Dutiable PP flat yarn grade prices in the region were last assessed at an average of $920/tonne CFR southeast (SE) Asia on 31 July, according to ICIS data.

Regional supply in southeast Asia has lengthened, with most producers that were previously shut for maintenance turnarounds in July having resumed operations.

Some southeast Asian producers were willing to negotiate prices with buyers as result, in order to off-load more volumes.

Focus article by Leanne Tan

(Image: Polypropylene containers)