Local prices of PP in Thailand could fall further on weak demand

Angeline Soh

16-Apr-2014

Focus story by Angeline Soh

SINGAPORE (ICISI)–Domestic prices of polypropylene (PP) in Thailand might fall further in the near term with the onset of the wet season which traditionally suppresses downstream demand, market sources said on Wednesday.

Thailand’s economy has been weighed by the months-long political limbo which began in November last year, forcing the Finance ministry in March to cut its growth forecast for 2014 to 2.6%, down from the 4% forecast in December. Thailand’s economy grew by 2.9% in 2013.

The Bank of Thailand on 31 March said that private consumption and investment shrunk by 2.5% and 7.7% year on year, respectively, in February, as anti-government protests continued to weigh on sentiment.

The protests have dampened domestic demand from end-user markets and this in turn has weighed on the prices of PP in the local market, according to market source.

“Margins have gotten so narrow, the sellers are incurring losses if the price go any lower,” said a Thailand-based trader.

This contrasts against other southeast Asian PP markets, which have begun to display price uptrends in April, according to several southeast Asia-based traders on Tuesday.

Thailand was the only domestic market saw its prices fall in the past two weeks. Its domestic prices were the lowest among the southeast Asian countries, according to ICIS data.

PP prices in Thailand have been falling by Thai baht (Bt) 0.50/kg. IPP film prices were at Bt51.00-52.00/kg (US¢71.66-73.07/lb) DEL Bangkok while PP injection and flat yarn at, Bt50.50-51.50/kg (US¢70.96-72.36/lb) DEL Bangkok during the week ended 11 April, the data showed.

Prices across other southeast Asian countries, meanwhile, have been largely stable-to-strong during the same period.

In Vietnam, PP injection and flat yarn prices have increased by dong (D) 200-300/kg DEL HCMC to D36,800-37,000/kg DEL HCMC (US¢79.19-79.62/lb) over the past fortnight. Over at the Philippines, prices were at Philippines pesos (Ps) 40.00-41.00/lb (US¢89.18-91.41/lb) DEL Manila, up by Ps1.00/lb.

In the meantime, PP market discussions in Thailand have been disrupted due to the Songkran holiday from 13-16 April. The Songkran festivities celebrate the start of the wet season in Thailand.

“Prices could decrease further when the market reopens. This period signals the start of the rainy season, which typically reduces the downstream demand,” said a Thailand-based trader.

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