OUTLOOK ’18: India PP prices expected to firm up in Q1 on firm demand

SINGAPORE (ICIS)–India’s spot polypropylene (PP) prices are expected to firm up in the first quarter of the next year on the back of limited supply and strong demand at the beginning of the year.

Upcoming maintenance turnarounds across facilities in the Middle East as well as Asia, coupled with stronger demand to replenish stocks after the year-end holidays is expected to lend support to prices across the markets in the first quarter of the year.

Strong growth in Indian PP demand, coupled with limited capacity expansions on the domestic front continues to lend support to India’s reliance on imports.

“Unlike PE where India has become a net exporter, India is still dependent on imports to meet a significant portion of its total demand that continues to grow,” an Indian importer said.

Packaging of processed foods and demand rising from the agriculture sector – popularly known as ‘plasticulture’ continues to support strong demand for PP in India.

PP is a popular product of choice for multilayer films in flexible packaging. Woven PP sacks are used to pack food grains in India. Additionally, PP also finds uses in irrigation and greenhouse equipment and fittings.

Although PP flat yarn and injection moulding represent two of the biggest markets for Indian PP, grades such as non-woven PP presently enjoy strong double-digit growth rates, propped by demand emerging from a wide variety of downstream sectors.

In the FY 2016-17, total PP imports into India grew by 11.9% year on year. In the first half of the current fiscal year, total imports into India grew 17.5% from the same time last year.

Although India has been a regular exporter of PP, export volumes have shrunk in the recent months, in view of increased demand for the polymer in the domestic markets.

Also, scheduled and unscheduled maintenance turnarounds at a few domestic facilities undertaken earlier in this year also limited overall availability among Indian producers, leading them to allocate more cargoes to the domestic markets, curbing export volumes.

Indian PP exports in the FY 2016-17 were down 22.3% from the previous year.

From the beginning of the current financial year in April to September, Indian PP exports contracted by 33.15% from the similar period last year.

Some suppliers expect firmer PP prices to see an uptrend well into the second quarter of 2018, propped by strong demand and a lack of inventories following robust sales in early months.

“We expect PP prices to be mostly on a rise until May, after which prices may cool off,” a Gulf Cooperation Council (GCC)-based supplier said.

Spot supply from the Middle East has also generally been not very long since early 2017, and is expected to remain largely similar going into 2018.

PP supply across Asia and the Middle East was hit early this year by a fire that broke out at the Abu Dhabi National Oil Company’s (ADNOC) refinery in Ruwais on 11 January, affecting Borouge’s PP production.

Overbookings among other suppliers coupled with a shortage in feedstock propylene in some GCC countries also lent support to firmer Indian import prices through the first quarter of 2017.

Prices came off late Q1 onwards following improved spot availability, but rebounded in the second half on the back of robust demand from China.

Chinese demand emerged stronger after the National day holidays in October buoyed by low stocks.

Furthermore, planned and unplanned shutdowns undertaken at Chinese production facilities for environmental emission checks also supported demand for imports, lending support to higher prices across markets including India.

China looks to enforce a ban on the import of waste plastics 2018 onwards.

The possible implementation of a blanket ban is likely to support greater demand for virgin resin in 2018, supporting higher prices across regions, according to industry sources.

On the other hand, 2018 is also poised as the year where China is slated to intensify its efforts to improve air quality.

Hence, it is likely to witness shutdowns at several of its downstream polymer processing units where emission standards do not meet the specifications set.

This is also likely to influence demand for PP imports in China, and may have an effect on markets and prices worldwide.

Outlook article by Veena Pathare