SE Asia’s PPH regains premium over China after 3 weeks

According to weekly average data from ChemOrbis Price Index, China’s local homo-PP raffia and injection markets reached their highest levels in over a year in early October, following the firm market return post-Golden Week holiday. This marked the first time since mid-December 2023 that China’s local prices traded above Southeast Asia’s import levels, with a premium of around $16/ton.

However, in the second half of October, diverging trends reversed the situation, with Southeast Asia’s homo-PP raffia and injection imports regaining their premium over China’s local prices. The current gap has widened to $30/ton, the largest since mid-August, according to ChemOrbis data.



Prices rise in SEA on demand uptick, higher costs

In Southeast Asia, the PP markets have followed an uptrend in the past three weeks. Over the week ending on October 25, import homo-PP raffia and inj. prices for all origins were assessed $20-30/ton higher from the previous week, at $950-990/ton CIF, cash. Prices for Chinese materials were positioned near the higher end of this range.

Regional demand saw a slight improvement as buyers made purchases to hedge against further increases. Rising upstream costs also encouraged sellers to lift offers, with spot propylene prices posting a $20/ton gain to $830/ton CFR Southeast Asia, as per ChemOrbis data.

“Converters have started buying small volumes to restock inventories, aiming to hedge against upcoming hikes,” a Singapore-based trader noted. A Vietnamese player added, “Demand seems to have slightly improved. Perhaps the time has come to replenish. Buyers may be rushing as they see prices ticking up.”

China’s market dampened by falling futures, supply pressure

On the other hand, reduced futures prices, weaker-than-expected demand, and ample supply pulled homo-PP raffia and inj. prices down for two straight weeks inside China. The latest assessment showed a weekly decrease of CNY50-100/ton ($7-14/ton) in the domestic price range, at CNY7450-7650/ton ($928-953/ton without VAT) on ex-warehouse China, cash including VAT basis.

A Chinese trader noted, “Despite recent monetary policies, the positive impact on PP markets has been limited, as downstream buying interest remains sluggish due to weak end-user orders.”

Producers have reportedly managed supply pressure through run rate cuts, leading to a continuous decrease in domestic stock levels. Last week, total polyolefin inventories fell by 90,000 tons from a week earlier to stand at 725,000 tons as of October 25. However, with significant capacity additions of 4.05 million tons/year in Q4, supply concerns persist, weighing on market sentiment.

Potential resurgence of Chinese-origin PP in SEA by year-end

As the peak “Golden September – Silver October” season winds down, demand for PP applications in China is expected to slow further in the coming months. Limited buying interest may keep the domestic market sluggish, leading to potential price reductions and prompting sellers to divert cargoes to overseas markets for better netbacks. With substantial new PP capacity in China in the last quarter, Chinese exporters are likely to increase shipments to nearby Southeast Asia to balance domestic supply.

Indeed, data from ChemOrbis Stats Wizard Pro reveal that China’s PP exports to Southeast Asia surged significantly during the first eight months of 2024, despite challenges from high prices and muted demand. Heading to the year-end period, Southeast Asia markets are expected to witness more Chinese-origin materials as lower domestic consumption and rising supply continue in China.