Is sentiment changing in Asian PP markets?
In China, current import PP prices are carrying a $145-205/ton premium over the theoretical PP production costs based on spot propylene prices. Propylene prices are steady on the week but around $20/ton firmer when compared to the beginning of April. On top of the large gap between the theoretical production costs and the actual PP prices, there will be several PP plants coming back from their maintenance shutdowns over the next month. Plus, overall demand for PP performs slowly in China since buyers, being cautious towards the high end offers, are limiting their purchases now to their needs basis. Buyers generally think that the overall offer levels are already too high while some voice that prices may soften over the near term.
To track weekly developments in China’s PP market, please see China Weekly PP Analysis (For members only)
A converter operating in China commented, “We purchased some Saudi PP raffia and the offer level was steady on a week over week basis. However, we have been limiting our purchase amounts to our basic needs for almost one month because we hold sufficient stock levels to carry on with our production. In general, overall PP demand performed well in March and April but we are anticipating a slowdown in May. Plus, supply levels will be more comfortable in May given the returning plants from maintenance shutdowns.”
The PP market panorama appeared to be similar in Southeast Asian PP markets, too. After several weeks of consecutive increases, players in this region also started to question whether the prices have reached peak levels or not. Many draw attention to the large gap between PP prices and propylene costs as well as the arbitrage opportunities from China to Southeast Asia. However, sellers, who continue to highlight limited supplies, think that the Southeast Asian markets are not likely to soften before June.
To track weekly developments in Southeast Asia’s PP market, please see SEA/India Weekly PP Analysis (For members only)
When looking at the average PP prices both in China and Southeast Asia, ChemOrbis Price Wizard suggests around a $95/ton difference between these two regions.
Source: ChemOrbis Price Wizard
Although the low end of the PP prices may still see some upward pressure in Southeast Asia, the high ends might face some downward pressure coming from the large gap between the spot propylene and PP prices as well as the arbitrage window opening from China to Southeast Asia.
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