China’s import PP upturn persists despite buying resistance

Import PP prices in China have extended their gains into the third week after the Lunar New Year holidays. Despite buyers’ resistance, overseas sellers have stayed firm on their offers amid a global dearth of supply and several other export outlets offering much better netbacks.

Meanwhile, domestic suppliers have regained confidence and raised their list prices after applying some discounts last week.

“The post-holiday hikes have faced strong resistance from PP buyers in China. However, the upturn continues to be boosted by strong crude, high propylene prices, and a global shortage of supply. We believe that demand will improve soon since buyers should accept higher prices once they are convinced that the market will remain firm,” said a few traders.

Import market up 17% compared to pre-holiday week

Data from ChemOrbis Price Index reveal that homo-PP and PPBC prices on CIF China basis have recorded a total gain of 17% compared to the pre-holiday week. Meanwhile, the weekly averages of prices for all origins were quoted at $1265/ton for homo-PP raffia and at $1355/ton for PPBC inj. as of March 10. At these levels, PP raffia stands at its highest since October 2018, while PPBC is at a three-year high.



Cost support and global tightness continue

Bullish upstream continues to support the PP markets.

Crude oil benchmark Brent rose above $70/bbl after Yemen’s Houthi forces fired missiles at Saudi oil facilities this week before pulling back. Over the week, Brent and WTI rose 5% to $68/bbl and $65/bbl, respectively, on March 9. Meanwhile, spot propylene prices in Asia have been hovering around their highest levels since October 2018.

On the supply front, global tightness is yet to fully ease in the aftermath of the weather-driven shutdowns in the US. “Although the restart process has started at some US plants, it might take 1-2 weeks for production to return to previous levels due to safety checks and trial runs. Meanwhile, there are planned shutdowns in the Middle East and Asia in March,” said a trader.

High local inventories offset by plant shutdowns, increased exports

The two major domestic producers’ combined polyolefin inventory was 915,000 tons as of March 9. Despite a daily drop of 60,000 tons, the market has been generally slow to digest the high stocks accumulated during the holiday.

However, players note that the high domestic inventory levels have been offset by the turnaround season that kicked off in March and increased exports, particularly to Europe and South America.

“Chinese producers have focused on the export markets offering juicy netbacks. Rising export activities coupled with several plant shutdowns at home have offset the major producers’ high inventory levels,” a seller commented.