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Bearish sentiment continues to permeate India’s PP, PE markets ahead of Diwali

by Shibu Itty Kuttickal -
  • 08/11/2023 (02:18)
Bearishness continues to rule the Indian PE and PP markets as the country heads towards the Diwali holidays early next week. Demand remains persistently weak amid ample availability within the country and at its import sources.

Polyolefin prices, which saw a two-month rally from August, moved on to a downward trail in October. This is because the demand situation kept looking weak, with an apparent lack of support from the upstream markets, despite a war situation in the Middle East.

It’s a problem of plenty in India

Already laden with ample supplies, more PP and PE shipments are thought to have landed in Indian ports in both September and October.

ChemOrbis Stats Wizard shows imports of PE into India doubled year-on-year in the eight months till August this year to about 2.6 million tons. Additionally, PP volumes shipped to the country rose by about 35%, reaching around 1.2 million tons during the same period. In August alone, PE imports were about two-and-a-half times higher than in the same month in 2022. In the whole of last year, India imported about 2.4 million tons of PE and 1.5 million tons of PP.

“There is no problem of availability for both PP and PE in India. We’ve had plenty of imports coming in, and our supplier markets seem to be on a tipping point. And imports haven’t sagged in the last two months as we see it,” said a trader based in Mumbai.

Demand remains disappointed post-monsoon

Meanwhile, there are no reports of a post-monsoon surge in activity at infrastructure projects yet that would have had a salutary impact on polymer sales. Demand hasn’t also taken off ahead of the expected rise in plastic consumption during the holiday season in November-December. “There’s diminished appetite for sure as manufacturing activity hasn’t increased in tune with expectations of a surge after the monsoon season,” said a trader based in Mumbai. “It remains to be seen whether uptakes can increase ahead of the year end. Most indications are that we may not see any sustained demand recovery before some time in the first quarter of next year,” he added.

Manufacturing activity has continued to slow down in India, as reflected by the purchasing managers’ index. In October, the PMI slipped to the lowest in eight months, falling to 55.5, compared to 57.5 in September. It is the lowest since March when the PMI was 56.4. The surveyor, S&P Global, said there was a slower increase in total new orders, production, exports, buying levels and stocks.

Buyers diffident as prices keep falling

However, another trader said it was not a question of demand but one of price as supplies have been ample. “People may be buying if the price is right. But the point to be made is that the current availability is ample, and converters feel they can afford to wait till prices have fallen enough,” said another Indian trader.

The diffidence among buyers has resulted in prices mostly showing a decreasing trend. In the PE markets, market players reported import LDPE film prices in a $990-1020/ton CIF India range currently, lower by about $10/ton from about a month ago. LLDPE film prices have also been reported mostly below the $1000/ton mark, with some traders pointing to shipments changing hands at as low as $950-970/ton CIF India.

HDPE film continued to be the more actively traded grade, compared to LLDPE and LDPE film. The current import prices of HDPE film are reported at $1000-1030/ton CIF India, down by about $30/ton from a month ago.

As for homopolymer PP raffia, some market indications point to prices going as low as $910-920/ton CIF. But most of the offers reported were in the $940-990/ton range, compared to the $980-1020/ton range reported a month back.

Feedstock costs fall slightly

At the same time, energy and feedstock costs have not seen a great increase despite the ongoing conflict between Israel and Hamas in the Middle East.

Brent crude futures in the last month have moved mostly in an $84-90/bbl band, while ethylene and propylene prices have both fallen by about $10/ton over the last month to $870/ton and $860/ton respectively, both on a CFR China basis.

Unlikely for markets to rise ahead of year-end

Other regional markets such as China and Southeast Asia also continue to show a declining trend, reflecting on the Indian polyolefin markets, especially as downstream markets are just waiting and watching without taking any buying decisions.

“Most of the buying for the year-end consumer demand should’ve been over by now. So, we don’t expect a further surge of buying interest before February or March next year,” another Indian trader added.

He also added that as people take leaves around the Diwali festival later this month, activity in the Indian market is likely to dip, which may lead to a further erosion in demand.
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