Pent-up demand lifts India’s PP market

Import and domestic PP prices have trended higher in India as a result of pent-up demand, as well as rising oil prices and higher freight rates, traders said. Expectations of higher prices have also sparked buying interest.

Import prices of PPH raffia were reported at $1320-1350/ton CIF India for February delivery cargoes, about $20-30/ton higher than prices reported for January, traders said.

"We find similar prices being quoted for imports into other countries in the Indian subcontinent too," a source with an Indian producer said. "The current market trend is bullish. Prices have been rising steadily," he said.

Pent-up demand due to minimal buying earlier

A Mumbai-based trader agreed, pointing out that replenishments were minimal in November-December and there were requirements ahead.

"Most players were content with minimal buying just for immediate requirements. This has meant pent-up demand, especially in a situation where feedstock prices have rallied in tandem with crude oil. This, of course, has triggered bullish expectations in PP prices " he added.

Crude oil prices have rallied by about 18% over the past five weeks, with the latest week seeing a 4% rise. Propylene prices have risen by about 6% during the same period, ChemOrbis data show.

Traders also pointed to the difficulty in finding vessels from northeast Asia to India, which have meant higher freight rates as well as a drag on import arrivals, tightening local supplies. “We find these factors raising expectations of a further rise in prices ahead,” the trader said.

Local prices also rising

India’s local prices are rising too. Traders reported prices of PPH raffia sold by the domestic producer at INR106,000-111,000/ton ex-warehouse India, cash basis, marking an increase of about 1-2% from the previous month.

"PP demand in the country was about 5.5mn tons in 2021 and recent studies have projected demand to grow at a compounded annual rate of about 7.25%," the producer said.

As one of the top 5 manufacturers of PP in the world, Reliance Polymers has an annual production capacity of 2.7 million tons. Even though the local producer has a large capacity, the local demand is still not fully met domestically and imports are playing a crucial role in setting the market direction.

Traders said government investment in manufacturing personal protection equipment has lifted PP demand in India. There is also higher demand for PP films for flexible packaging of fresh and frozen foods and in the pharmaceutical sector.

On the flip side, PP use in automobiles has been sliding because of a fall in production resulting from lower availability of computer chips used in automobiles.