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Non-European PPBC offers at aggressive levels add to bearishness in Italy

by Manolya Tufan - mtufan@chemorbis.com
  • 30/11/2023 (14:37)
Whilst players are bracing themselves for another round of decreases in December, the emergence of aggressive non-European origins has contributed to the bearish scene in Italy. South Korean PPBC offers that trade at a discount to the PPH levels have mirrored the weakness in underlying demand for downstream applications as well as the most recent trend in Asia.

The pressure mounts

In Asia, PPBC inj. prices started to trade nearly on par with PPH grades amid growing supply pressure and weaker demand for downstream applications. With a lack of premium over PPH prices in Asia, South Korean suppliers appear to have diverted some of their PPBC cargos to elsewhere. Aggressive prices intensified the downward pressure on other origins and regional suppliers.

PPBC offers for this origin stood even below the spot PPH prices in some cases. This week, South Korean PPBC inj. has been sold at €1030-1040/ton DDP Italy, 60 days, with delivery in late January. Meanwhile, an offer for February delivery was reported as low as €950/ton CIF, 60 days last week.

Indeed, distributors reported to have achieved better sales for South Korean material recently. Nevertheless, South Korean producers are not willing to come below the €1000/ton FD level.

In the spot market, price assessments lastly stood at €1100-1200/ton for PPBC and at €1050-1150/ton for PPH injection, all on FD Italy, 60 days deferred payment basis.

Spot PPH draws near €1000 FD threshold

Spot markets have been offering a competitive edge, needless to say. Hence, some buyers switched to the spot market. PPH prices moved closer to the €1000/ton FD threshold as offers as low as €1030/ton were obtainable this week. According to players, suppliers were willing to concede to larger drops in case of bulky purchases to get rid of material.

December hints at softer trend

Bearish expectations for next month affected November sales, leading to special deals in some cases to close transactions. PP markets are widely expected to extend their losses into the second month in December. While sellers are motivated to run their stocks down, buyers are planning to shut their plants earlier than usual this year starting from mid-December. A buyer remarked, “As overall demand has slowed down and our stocks are high, we plan to shut earlier in December.”

Players hope to see decreases similar to November, attributing it to the propylene projections that call for €40-50/ton drops and poor market fundamentals. Processors bought on a hand-to-mouth basis during November and replenishment activities would not necessarily exceed needs in December. This is because early 2024 expectations are not that bright, considering global economy and the supplies outpacing demand.

As a side note, players do not expect to see hefty decreases as there will be only two working weeks in December. Indeed, some participants claimed that there has been a slight increase in price inquiries.

Gap between spot and import PP to narrow

Apart from subdued downstream sectors, softer projections for the last month of the year, known for destocking activities across the board, kept buyers on the sidelines.

Spot PP ranges are likely to come down once fresh offers start to be revealed. Accordingly, the gap between the non-European and regional spot prices is expected to narrow. This may lure some buyers back to the spot market to cater their needs.

Will Chinese PPH imports increase next year?

Chinese PPH prices were also heard from the market, albeit not necessarily at aggressive levels. Last week, PPH inj. offers for this origin were reported at €1100/ton DDP Italy, 60 days, with delivery in January-February.

As for the longer run, some participants argued that regional markets may see increased volumes from China, attributing this to the massive capacity additions in that country amid murky demand projections for 2024. China introduced a new capacity of around 5.2 million tons so far this year, while there is an additional capacity of 2.1 million tons scheduled for December. Meanwhile, PP capacity addition plans for 2024 are totalling around 7 million tons.

As China’s becoming a net exporting country has become more pronounced, more imports from Asia may find their way to Europe, if not from China. China’s PP exports hit an all-time high in 2021, with cumulative exports of around 1.4 million tons indicating a yearly increase of 227%. PP exports in the first 10 months of 2023 hit over 1 million tons, which is a strong figure proving that China boosted exports looking at the historical data. When completed, this year’s exports will even breach 2022 exports totalling around 1.3 million tons.
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