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Monsoon dampens India’s PP and PE markets in July

by Shibu Itty Kuttickal -
  • 12/07/2023 (16:48)
Import PE and PP prices in India continue to languish as demand weakened further in July, compared to the previous month. Buyers have kept waiting for further price cuts, despite some hike attempts by sellers. Although the monsoon rains had a sluggish start in June, it made up for the shortfall in the weeks ahead, keeping polyolefin requirements lower. Slowing Asian and western economies also affected the market sentiment.

The Indian polyolefin markets started the year on a positive note but turned softer in March and kept on a bearish trail since then as Middle East availabilities rose even as a downturn in China meant more supplies being directed to the country. The monsoon is the latest factor that’s negatively impacting the markets.

Prices stay on the downtrend

Market participants reported the import low-density PE (LDPE) film grade to have fallen by about $20-30/ton from levels noted around mid-June to currently trade at $930-970/ton CIF India. The same levels were noted also for the linear-low density PE (LLDPE) film grade, down from $980-1010/ton around mid-June. However, import HDPE film prices remained mostly around the previous mid-month levels, with the low-end showing just a $10/ton fall in a range noted at $970-1010/ton.

“There are competing offers to India for both PP and PE from different origins, including South Korea, Vietnam, Thailand and from South American producers,” a Delhi-based trader said. “But this looks like a buyers’ market and players are mostly looking for bargain buys,” he added. He also pointed to sub-prime material being offered to the country, which is pulling down the market further.

Meanwhile, import prices of homopolymer PP raffia has fallen below the $900/ton mark at the low end. Market participants quoted PPH raffia prices at $880-920/ton CIF India, cash, down from $900-940/ton in the previous month. PP block copolymer injection prices were noted at $880-940/ton levels, falling by around $100-110/ton from the previous month.

HDPE performs slightly better than LD and LL

Apart from the monsoon, market participants pointed to weak demand and long supplies in Europe, the US, and China weakening the sentiment further. Indian LDPE demand in July was seen lower than June due to the rainy season. But a trader said domestic producers in India were unlikely to announce any price incentive schemes for July and as for August, “we have to wait and see”.

There was a mild rush to buy LLDPE film towards the end of June, “but that excitement has apparently cooled down as we entered July,” another trader said. Meanwhile, despite weak fundamentals also in HDPE, Indian players said the HDPE film grade performed better than the LDPE and LLDPE grades.

Sentiment stays bearish, buyers keep looking for even lower prices

“The sentiment is clearly bearish, with buyers looking for prices further lower,” the Delhi-based trader said. “It seems buyers are out to buy at the lowest level possible for all grades. They’re apparently not convinced by whatever low prices sellers are offering currently,” he added.

Meanwhile, the upstream markets are being keenly watched by the market participants. “Both ethylene and propylene prices have seen increases in the last few weeks, but the question is whether this can be sustained. We are not hopeful about these markets sustaining the increase. Naphtha also has slightly risen but it’s been too volatile, which is not good for the market. We are banking on the upstream markets resuming a downtrend soon,” he added.

Traders also pointed to a liquidity crunch in the market that’s making it difficult for the polymer trade. “There is already a cashflow problem. There is a lot of cash stuck in the banks, especially after the recent withdrawal of the INR2000 currency notes from the system. Indians are still exchanging these notes through the banks, and this has resulted in a cashflow problem,” a trader added.

Global economic omens not encouraging

Meanwhile, China’s producer prices fell at their fastest pace in over seven years, while consumer prices were on the edge of deflation. This could prompt Chinese policymakers to use further stimulus measures for reviving the sluggish demand, which has hit polymer markets. The momentum in China’s post-pandemic recovery has slowed from a brisk pickup seen in the first quarter with demand for industrial and consumer products weakening.

Market participants said the Chinese economic woes, coupled with rising inflation in both US and the euro area, may reflect on the Indian market too, where demand for polymers have remained weak since March.

Infrastructure projects may breathe new life

The monsoon this year in India started in early June on a sluggish note but has picked up and have made up for the slow start later in June and in July. It has also wrought large-scale infrastructure damage in a number of northern Indian states.

“We expect maintenance and new government infrastructure projects to be announced and tendered for in the next couple of months. This could mean an increase in polymer demand, which could be felt from October,” a Mumbai-based trader said.
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