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PP, PE recovery elusive yet in India but seasonal strength round the corner

by Shibu Itty Kuttickal -
  • 13/09/2022 (02:52)
Recovery in PP and PE markets in India has stayed elusive despite expectations since last month but the approaching Oct-Dec festive season and a lengthy period of inactivity may lead to pent-up demand and prop up prices. A couple of refinery issues would also likely start crimping polyolefin supplies in India soon.

Polyolefin demand typically starts rising around mid- to end- August as downstream players stockpile for product orders expected to cater for the rush to buy white and brown goods, and for packaging material ahead of the year-end. But as PP and PE prices kept tanking, players have desisted from stocking up, expecting the downtrend to stay. This, market players said, have led to local inventories diminishing in the Indian market.

Prolonged slide and expected rebound

“We should have seen demand rising at least by late last month but since prices have fallen over a prolonged period all around Asia, people have kept waiting for continuing price cuts. Buying has stayed minimal and only for immediate requirements. This has resulted in lower polyolefin stocks among converters and we believe prices are about to rebound as the high season is round the corner,” said a source at an Indian producer.

“We’ve seen prices fall by more than 30% since April. We feel the time for a rebound will come soon,” said an Indian trader.

Prices have been stable to lower in the past few weeks though. Import prices of PPH raffia are currently staying in the $1050-1080/ton CIF levels noted about three weeks ago. “We see prices rising above the $1100/ton mark this month, with further increases likely as demand rises,” the trader added. Raffia’s import prices have fallen from the $1300/ton levels heard in early July.

LD-LL delta shrinks in India

As for PE, LDPE film prices, which were noted in a fairly wider range of between $1280/ton and $1320/ton CIF in the Indian import markets about three weeks ago, are now reported by traders at $1190-1210/ton.

LDPE prices have seen a sharp fall, but LLDPE and LDPE film prices have mostly held on to the levels noted a couple of weeks ago. Both HD and LL film prices are currently noted around the $1100/ton CIF India levels, same as three weeks ago, but down from the $1300-1320/ton levels noted in early July for both the markets.

Traders pointed to a shrinking of the delta between LDPE film and the other two film grades. “The market has been seeing a great deal of substitution of LDPE with the other grades by converters. This was to be expected as LD’s delta with the other grades had been sizable for many months when the substitution started happening. Once a converter starts doing that, it becomes his recipe for the long run,” a trader said.

“India has become more of an LLDPE market. There’s more demand for LL in the past few months, compared to HD,” another trader said.

Refinery issues are a bullish factor

Apart from a possible demand recovery, market participants are also pointing to refinery turnarounds that would likely tighten supplies of PP and PE in the Indian market.

They referred to to technical issues in Reliance’s PP and LDPE plants that are likely to cause production disruptions. Issues at Indian Oil’s Panipat naphtha cracker plant are also likely to hamper olefin supplies to Indian PP and PE producers.

GDP growth versus rise in interest rates

The bulls in the Indian polyolefin markets would also point to the 13.5% growth in the country’s GDP during the April-June quarter to buttress the argument that a rebound was round the corner.

At the same time, bears point to the likelihood of any consumer ardour being cooled off by the rise of borrowing costs. India’s central bank has raised the benchmark policy rate by 140 basis points in three rate moves since May and has vowed to do more to bring inflation under its 6% target ceiling.
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