Baht’s slide, turnarounds make a case for higher Thai PP, PE domestic prices

A decline in the Thai baht, coupled with reduced local supplies as domestic producers took suppressed prices as a cue to shut down plants for maintenance, have led to Thai local prices of PP and PE rising. The current local market strength could also be a delayed response to the rise in feedstock costs since June.

Producers have curtailed PP and PE output, torn between high feedstock costs and lower downstream prices. This has raised the possibility of crimping availability ahead, amid a likely rise in requirements ahead of the year-end shopping season. "It’s a difficult situation for polyolefin producers as the production costs are still high while current downstream demand stays weak,” said a trader in Thailand.

Local prices rise as baht depreciates

ChemOrbis Price Index data show homopolymer raffia, HDPE film and LLDPE film prices rising by about 3% and LDPE prices rising by about 5% over the last one month. Local prices are currently assessed at THB39,000-40,000/ton ($1057-1085/ton) for homopolymer raffia, while PE film prices were at THB42,250-42,750/ton ($1146-1159/ton) for LDPE, THB42,750-43,250/ton ($1159-1173/ton) for HDPE and THB42,000-42,500/ton ($1139-1152/ton) for LLDPE, all on FD Thailand, cash basis.



In dollar terms, however, LDPE prices show a 1% increase, while the rest of the PE and PP grades show decreases ranging from half a per cent to 1%, also reflecting the sliding value of the Thai local currency. The Thai baht has lost more than 4% of its value over the past one month. In fact, the current year has seen the baht rank as one of the region’s worst performing currencies, depreciating to a low of 37.14 to the US dollar earlier this week – a level not seen since last November.

Sellers try hikes, but buyers won’t budge

In the latest week though, local trading in polyolefins was not too active in Thailand, with most converters already replenished for requirements till end-October. But the continuing strength in feedstocks ethylene and propylene has kept sellers on their toes to revise prices higher or at least to keep them steady, as plants are being taken down for maintenance or run rates are being reduced.

Ethylene and propylene prices in Asia have rallied by 21-24% since mid-June. But despite this, buyers are keeping a ceiling on the high-end as downstream uptakes and end-user demand stay suppressed.

Producers take cover, opt for shutdowns

As for shutdowns, HMC Polymers, a major Thai producer has what a trader called “commercial maintenance” at its PP line 3 from mid-September to end-December, while compatriot SCG is reportedly planning a shutdown of one or two PP lines, following maintenance of an 800,000 tons/year naphtha cracker between mid-November to end-January. “Both these maintenance shutdowns are being undertaken as PP demand had stayed weak for a prolonged period,” a Thai trader said.

Traders also said a Thai producer has shut for 30 days an LDPE unit starting Sept 22, and it is also expected to shut an HDPE line in November. SCG may also shut one or two PE lines in mid-November, along with the aforesaid cracker shutdown.

Another local trader in Thailand said sellers could be keeping prices higher just to spur more sales. “It could be a ploy to stimulate sales and to perpetuate an idea that the markets are about to rally,” he added.