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Asian PP markets stuck amid buyer-seller tug of war; can latest oil surge dispel uncertainty?

by Elif Sevde Yalçın -
by Merve Sezgün -
  • 19/03/2024 (01:46)
Import homo-PP prices in China and Southeast Asia have sustained a stable to firmer trajectory since around the second half of December, supported by high feedstock and freight costs, coupled with tighter Middle Eastern supplies. However, both markets have remained largely stable recently, stuck between sellers’ firm stance and buyers’ stiff resistance.

Most converters in Asia have sit tight this week in anticipation of potential price corrections, pointing to a lack of substantial recovery in overall regional demand and China’s ample domestic availability. On the other side of the coin, suppliers have continued to address their elevated costs, even though spot propylene prices have recently stayed flat in China and witnessed a slight decrease in Southeast Asia.

The recent surge in crude oil futures has come at a time when the market is searching for a clearer picture, and hence players are questioning whether it can dispel the current uncertainty.

China’s PP futures surge on crude oil news

May PP futures on the Dalian Commodity Exchange settled CNY136/ton ($19/ton) higher at CNY7550/ton ($929/ton without VAT) on Friday, March 15. This increase came as a knee jerk reaction to Brent cure oil settling above the $85/bbl threshold on March 14.

Indeed, Brent futures have stayed above $80/bbl over a month-long period, providing a fundamental underpinning for polymer markets across Asia. However, the breach of the $85/bbl threshold in futures could prompt bullish sentiment among market participants.

Additionally, the scheduled maintenance shutdowns for PP in China during the second quarter could set the stage for fresh attempts by PP suppliers to raise prices in the near term, not to mention the scarcity of Middle Eastern offers given a busy maintenance season in that region.

CIF China/SEA PP prices hover around 5-month highs

As per ChemOrbis Price Index data, Southeast Asia’s import homo-PP raffia market has climbed around 10% since late December, while the Chinese market has seen a smaller gain of 5% over the same period. CIF SEA prices are currently carrying a premium of $75/ton over CIF China prices, up $60/ton since the firming trend kicked off in both markets in December.

For the current week, homo-PP raffia and inj. prices for all origins were assessed stable from last week at $880-970/ton CIF China, cash, and at $960-1040/ton CIF SEA, cash.

Converters sit tight, waiting for price corrections

Several PP converters across regional markets reported that they opted to remain on the sidelines, rather than take immediate action, citing current prices deemed too high to accept.

“Concerns over potential downside risks in the near term are prevalent, with most converters holding back on purchases. The supply-demand fundamentals remain weak, exerting downward pressure on prices,” noted a trader in China.

China’s abundant domestic supplies have remained a concern for players, as local suppliers have struggled to alleviate stock pressure since the end of the holidays due to ongoing sluggish destocking activities.

In Southeast Asia, too, competitively priced Chinese imports have partially offset the impact of the absence of Middle Eastern suppliers. Despite high costs, producers have maintained stable offers due to resistance from buyers.

Regional converters reported that they are having challenges trying to absorb the price hikes as their downstream buyers are unable to support the latest increases, reiterating that demand has been slow and prices of their finished products continue to lag behind raw materials.

“We have focused on finishing up our inventory first since we expect a downtrend soon. As demand is still lackluster, we heard that some traders are willing to give discounts for destocking purposes. Buyers also don’t want to replenish more as the demand from end-users is also weak. They don’t see a point in keeping material,” opined a Vietnam based buyer.

“We opt to stay in wait-and-see as we expect that prices will experience downward adjustments amid slow market activities. Although offers in the market are few and far between, some traders release their materials at quite lower levels than market prices,” said a converter also in Vietnam.
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