OUTLOOK ’14: PP market in SE Asia seen mixed on new supply, tax

31 December 2013 04:50 Source:ICIS News

By Angeline Soh

SINGAPORE (ICIS)--Southeast Asia’s domestic polypropylene (PP) market is likely to be mixed in the first half of 2014 as a result of new supply coming up and changes to tariff regulations of a country in the region, market participants said.

Prices are likely to be mixed across the individual countries while overall the demand is likely to be stable-to-strong across the southeast Asian countries, they added.

In Vietnam, a 1% import tax will be levied on PP imports with effect from 1 January next year, which will impact on imported PP prices, Vietnamese traders said.

The country plans to increase the tax to 2% in 2015 and 3% in 2016, they added.

The tax does not apply to the Association of Southeast Asian Nations (ASEAN) members because of a free trade agreement (FTA). Similarly, cargoes from China, South Korea and southeast Asia are except from import tariff because of existing FTAs.

However, cargoes from India and the Middle East, which account for a combined 40% of Vitenam’s PP imports, will be hit by the tariff, according to ICIS data.

From November onwards, Indian and Middle Eastern producers were heard to be in negotiations to reduce their offers so as to reverse the decline in buying interest.

Local stockists in Vietnam said the increased demand in China during the fourth quarter of 2013 has channelled local cargoes towards the Chinese market, resulting in tighter supply and increased local prices.

In 2014, the reduced buying interest in Vietnam for imports from India and the Middle East because of the additional import tariff may put further pressure on local prices to rise.

Local prices rose to dong (D) 38,000/kg ($1.8/kg) DEL (delivered) in second-half December, up by D1,100-1,400/kg from November. Domestic prices rose to D36,600-36,900/kg DEL, up by D300/kg within November itself.

In 2012, Vietnam’s PP consumption totalled 750,000 tonnes, about five times its production capacity of 150,000 tonnes/year, according to ICIS data.

Vietnam has only one PP producer, Binh Son Refinery (BSR), located in Dung Quat industrial park in Quang Ngai province with a production capacity of 150,000 tonnes/year. BSR is a subsidiary of state-owned oil firm PetroVietnam.

Stockists from Vietnam and Thailand said Thailand may benefit the most from the new import tax because it is a net exporter of PP. Stockists from Indonesia and Malaysia said their local production mainly supports the local markets.

Thailand’s HMC Polymers has been running its 300,000 tonne/year polypropylene (PP) plant at reduced rates since August because of reduced propane feedstock supply from PTT Global Chemical (PGC).

Stockists from Thailand added that the channelling of Thai cargoes to Vietnam for price optimisation may further increase domestic prices on tighter supply.

Meanwhile, PP supply is likely to increase in 2014 as a result of new plants, restarts and expansion.

Philippines’ JG Summit Petrochemical is expected to complete the expansion of its polymer facilities in Batangas by early January, according to ICIS data. The cracker, will supply feedstock to JG Summit’s 190,000 tonne/year polypropylene (PP) plant.

Christmas-driven factory orders in November drove domestic prices up in November. Local prices rose to Philippines pesos (Ps) 37.50 - 38.00/lb ($0.84-0.85/lb) DEL by Ps2.5/lb within the month.

Local stockists in Philippines said that the domestic prices are likely to be stable in 2014, on sufficient supply from the completion of the cracker.

Indonesia’s Polytama Propindo’s 380,000 tonne/year PP plant at Bangon restarted on 17 December after completing maintenance in early November.

A source said the plant faced a shortage of feedstock propylene from supplier Pertamina, which had diverted its supply to other downstream customers.

Local stockists said when the plant restarts, prices may see downward pressures on sufficient supply.

Thailand’s SCG Plastics plans to restart its PP plants at Map Ta Phut in early January, according to ICIS data. The 400,000 tonne/year capacity plant was shut in the second half of November for scheduled maintenance.

($1 = D21,101 / $1 = Ps44.41)

By Angeline Soh