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SE Asian PP, PE markets look for direction amid tepid demand, rising freights

by Shibu Itty Kuttickal -
  • 10/01/2022 (09:45)
Buying sentiment in Southeast Asia’s PP and PE markets may improve only after the Chinese New Year, with requirements for January mostly tied up and those for February limited, say players. On the other hand, imports come in a trickle given the recent surge in freight rates.

Slow demand has kept the Southeast Asian import PP and PE markets weak and players don’t expect a revival in the near-term. Offers have been few and far between. Most traders expect the situation to continue until the end of the Chinese New Year holidays.

A decline that started in October

The markets have declined since mid-October, when the Chinese government intervened in coal prices, and the slide continued as the Omicron variant of the COVID-19 virus started another round of infections across the globe. In the latest week though, the homo-PP raffia and injection prices rose, but only slightly, as some stock replenishments were reported amid higher crude oil and coal prices, yet buyers have still shied away from larger stockpiling.

Import PPH raffia and injection prices for all origins were assessed $10/ton higher in the week ended January 7 at $1170-1270 and PPBC injection prices stable at $1210-1290/ton — both on CIF SEA, cash basis. Import LDPE, LLDPE and HDPE prices were all stable during the same week at $1470-1560/ton, $1170-1250/ton and $1170-1240/ton respectively — on similar basis.

Slow demand has stayed a major theme in PP and PE markets. And, demand has been stifled by the lack of buyer confidence since mid-October despite COVID-19 curbs being eased.

Will buyers return to buy? Before or after holidays?

“Omicron has held back buyers and we think they can afford to wait till the end of the Chinese holidays,” said a regional trader. Market players point out that requirements for January and most of February have mostly been tied up, ahead of the Chinese New Year holidays.

“More offers may hit the market soon as players return from the New Year holidays but we don’t expect a big revival in demand shortly. Big-volume buying may take some time to return, possibly till the end of the Chinese New Year holidays. We may see buying only for immediate requirements at least till then,” said a trader based in Vietnam.

Higher freights counterbalance tepid demand

Keeping a floor though on the import pricing in both the polyolefin markets has been the rise in freight rates, which has raised import costs. The shortage of containers and vessels in the Asian markets has also slowed import flows, tightening Southeast Asian supplies.

Meanwhile, the shipping situation has led to Chinese PP being uncompetitive for Southeast Asian imports because of the prohibitive freight costs. “At the mid-$1100s/ton FOB China, it’s not workable at all for the Southeast Asian markets,” a regional trader said.

Cost-driven support is also there

Some players point to a cost-side impact of the latest crude oil rally as well as a ban on Indonesian coal exports in January that could have helped in PP prices edging up last week, apart from some stock replenishments ahead.

Indonesia on Thursday revoked more than 2,000 mining licenses, mostly of coal miners who failed to supply domestic customers, including power companies. This was on top of its ban on coal exports that sharply raised coal and propylene futures in China early in the week. Some traders also expect this development to have a bullish impact on the PP markets.
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