Southeast Asia PP hits 25-month highs; correction may ensue

29 September 2017 07:47 Source:ICIS News

Singapore port 29 September

SINGAPORE (ICIS)--Southeast Asia's polypropylene (PP) prices are currently at their highest levels in more than two years and may be due for a correction in the coming weeks on bearish sentiment, market players said.

The average import prices of PP flat yarn grade on 25 September reached $1,150/tonne CFR (cost & freight) SE (southeast) Asia, which was last seen in late July 2015, according to ICIS data.

Regional prices have risen by more than 12% since late June, driven up by China's bullish PP futures and spot markets.

Some suppliers in the Middle East and southeast Asia diverted September-loading volumes to the Chinese market, where margins are better, further limiting spot allocations to buyers in southeast Asia.

Spot PP prices in southeast Asia were also buoyed up by prevailing tight global supply in the aftermath of Hurricane Harvey, which had caused massive refinery and petrochemical capacity shutdowns in the US Gulf.

Traders with cargoes on hand withheld offers amid expectations that spot prices would rise further in late September and early October. 

However, the current uptrend in spot prices has begun to show signs of faltering, with the market outlook for October being clouded by the weakening PP futures market in China.

Market players said that domestic inventory levels in China have also started to gradually build up, as cargoes previously procured in August and September begin to arrive in the country.

Some harboured concerns that inventories might build up further next week, when the Chinese markets will be closed for holidays. China will celebrate its National Day and Mid-Autumn Festival on 1-8 October.

Meanwhile, trading momentum in southeast Asia's PP market has also taken a hit amid a bearish sentiment in the Chinese market.

While offers for October shipments emerged firmer month on month, suppliers conceded that buyers are posing a strong resistance to higher offers.

PP flat yarn cargoes from the Middle East were offered at $1,180-1,190/tonne CFR SE Asia in the week, but no deals were heard so far at these levels. Workable buying indications and bids were capped at a lower price of $1,160/tonne CFR SE Asia.

“Downstream buying appetite for finished products has been slow, and many converters still have resins stocked in their warehouse," a Malaysia-based distributor said.

“No buyer will want to stock up on inventories now that prices in China have begun to soften," the distributor said.

Despite the weakness in demand, market players said any steep falls in import prices will be unlikely as overall supply has remained snug.

Several ASEAN PP producers were heard to be having production problems, resulting in limited available allocations for October volumes.

“We do not have much volumes available for spot enquiries in October. The focus now is on fulfilling the requirements of our regular customers," a southeast Asia-based producer said.

Focus article by Leanne Tan

PP SEA - 29 Sep 2017

Pictured above: Singapore port (Photographer: Richard Sowersby/REX/Shutterstock)

By Leanne Tan