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Delta between import PPH raffia in China and SEA at narrowest since Dec 2023

by Thi Huong Nguyen -
  • 11/04/2024 (09:11)
Data obtained from ChemOrbis Price Index reveals that Southeast Asia’s import PP-homo raffia and inj. premium over China has notably decreased over the past couple of weeks. The primary reason behind this is the steady decreases in the former on the back of faltering demand and holiday lull.

PPH gap shrinks to 3-and-a-half month low

The weekly average of import homo-PP raffia and inj. prices in Southeast Asia has dropped 3.4% cumulatively over the last two weeks, reaching a three-month low of $980/ton CIF, according to ChemOrbis data. In contrast, the average import price in China, which is now $935/ton CIF China, has increased by half a percent within the same time frame.

Additionally, the data indicates that as of this week, the import pricing difference between the two markets has decreased to $45/ton, which is the narrowest gap since late December 2023. The gap also decreases by twofold within nearly a month.


Strong costs in vain in SEA due to demand weakness

Despite the ongoing strength in upstream markets, a continuous collapse in demand and buyers’ resistance to high offers have pressured the PP markets across Southeast Asia. “The trading atmosphere is subdued. Even though crude oil remains on a high note, it fails to boost buying enthusiasm. Buyers still prefer to replenish on a need basis,” said a Vietnamese trader.

Another trader based in Singapore opined, “Demand has stagnated during the fasting month of Ramadan, so sellers have cut their offers to attract buyers, who are still showing hesitance toward high levels. Producers keep citing escalating production costs and freight rates. However, converters are struggling to pass on these costs to end users, as demand and prices of finished goods have remained low.”

In the meantime, the markets have grown significantly muted this week, with a majority of market participants leaving their working desks to celebrate a series of major holidays, including Hari Raya in Malaysia and Singapore, Eid al-Fitr in Indonesia, and Songkran in Thailand.

China benefits from surging energy, easing supply pressure

The previous increases in crude oil prices, accompanied by improving fundamentals, paved the way for import sellers to slightly hike their offers a week earlier, while it has remained one of the key factors maintaining their firm stance this week. “Crude oil prices have still been robust, leaving room for overseas PP prices to retain their strength,” a Zhejiang-based trader commented.

Adding to the cost support is the ongoing tightness of import materials, especially those of Middle Eastern origins, in tandem with the region’s turnaround season. Besides, a slight demand uptick also has a positive impact on market sentiment. A converter said, “Purchase appetite has gradually lifted, with film production increasing. Still, converters are making small uptakes on a need basis.”

Will the smaller gap lead to reduced Chinese shipments in SEA?

A trader reported, “China markets have stayed firm lately, but export demand is relatively weak with fewer orders when compared to the previous period,” while another trader said, “Demand is expected to weaken in other Southeast Asian and South Asian countries due to the upcoming Ramadan holiday.” Indeed, the stagnant performance of Southeast Asian markets has hindered exports from China from flowing into the region to a certain extent.

However, considering substantial stockpiles at home, Chinese sellers are expected to maintain their all-out effort to destock through exports. The two major local producers’ combined polyolefin levels were at 860,000 tons on April 10, rising by 75,000 tons from a week earlier, mainly due to the accumulation after Qingming Festival. In addition, considering global shipping turmoil, Southeast Asia, particularly nearby Vietnam, remains a fruitful destination for competitive Chinese cargoes when compared to other distant outlets.
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