SE Asia’s PP rally loses momentum on arbitrage pressure

Southeast Asia’s import PP markets have been tracking an upward trajectory since prices rebounded from more than two-year lows in December. ChemOrbis Price Index data reveal that CIF SEA homo-PP prices climbed to a six-month high following the Lunar New Year holidays. However, the recovery has slowed recently due to a wide arbitrage to China, regional players noted.

China’s PP uptrend lags SE Asia

While homo-PP raffia and injection prices on CIF SEA basis have posted a cumulative gain of 15% since mid-December, China’s import homo-PP market has risen by about 10% and lagged the upward momentum in Southeast Asia.

As per ChemOrbis Price Index data, the delta between the two PP markets is currently hovering around $130/ton, up by 160% compared to mid-December.



Tightness keeps sentiment firm in SE Asia, eyes still on China

Players across Southeast Asian markets report that PP sentiment stays firm on the back of tighter availability, particularly due to a slew of maintenance shutdowns in the Middle East. The cautious pick-up in demand has also boosted sellers’ confidence since the end of the Lunar New Year holidays.

“The potential for further price hikes triggered some panic buying in the region ahead of the holidays. Although end-product demand remained weak, converters were more willing to build some inventories ahead of a possible round of fresh increases,” a regional trader said.

Nevertheless, this week has seen the upward trend losing momentum, with players pointing to the wide arbitrage window between the region and China.

A trader based in Vietnam said, “The PP uptrend has subsided as China’s import market has so far failed to catch up with the pace of gains in Southeast Asia. Demand is also not strong enough to support sizable price gains for the moment. Especially the high ends of the price ranges are hard to work, and they may even see some corrections unless CIF China PP prices increase visibly.”