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SEA’s local PP markets between higher costs, weak demand

  • 19/09/2016 (04:38)
In Southeast Asia, sentiment regarding import PP prices has been steady to firm for the past several weeks as prices saw an upward push from higher spot propylene costs in Asia. A slightly firmer trend was seen in import prices last week and the average import homo-PP price has fluctuated within a very narrow range of $10/ton since the middle of August. Sentiment in the local markets, however, was not as strong as players see weak demand as the predominant factor. In Indonesia’s local market, a price decrease was even reported on domestic PP prices last week.

A cup manufacturer in Indonesia reported last week, “A domestic producer reduced their PP prices by $20/ton. We are confused about the market direction. We think there should not be much room for decreases considering that monomer prices are firming up, unlike last year.”

A housewares manufacturer in the country said, “We noticed that a domestic producer made another price decrease. Our demand is stable but we are not in a hurry to purchase as there are no supply limitations. We don’t need to build stocks because prices will remain stable or decrease. We are feeling positive about our end product demand, there won’t be any significant upturn, but we expect it to remain stable for the rest of the year.”

An Indonesian bag maker, on the other hand, reported his dissatisfaction with demand. He said, “Demand is not so good and we don’t see signs of the peak season starting yet. We are buying only what we need and prefer not to keep too much stock. We expect the market should remain stable in the near term because costs are higher, but demand is stagnant and these factors should counterbalance each other.”

A woven bag producer in Indonesia said, “The PP market seems to be under pressure from weak demand and higher propylene costs that are pushing up the prices. We expect prices to be stable to slightly firm in the near term due to the upstream cost push.”

Another buyer in Indonesia said, “Most buyers are sourcing material locally. The domestic producer adjusts prices lower whenever buyers start sourcing import materials. As for us, our end product demand is very slow and we are no longer keeping any buffer material. We see many converters are running at reduced operating rates because of the quiet market conditions. We expect PP prices could move lower.”

In Vietnam a trader reported, “The local market is very quiet now. Demand is weaker compared to the same time last year. Domestic PP prices are below import prices and we prefer to source locally. We don’t expect prices can firm up again until after October because of the demand conditions. Demand may improve for the year-end, but so far we have not bought in advance and prefer to wait and see.”

A housewares maker in Vietnam said, “Demand is worse this year compared to last year. Our customers are not ordering as much as before. They prefer to buy on as needed basis and are more careful now. Local PP prices had risen a lot in early September, but then dropped back down again. We don’t expect they can drop much further but we also don’t think they will increase too much, so we prefer to buy as we need material.”

In Thailand another bag maker complained about his end demand. He noted, “This has been a bad year in terms of demand. It’s much worse when compared to last year. Even our customers are complaining about not being able to hit their sales targets. Local PP prices have not been able to reach the level of 50 THB/KG yet, the highest they could reach was around 47 THB/KG because of the weak demand this year.”

A trader in Thailand highlighted the previous attempts to raise local PP prices, but noted that due to lackluster demand, offers had to be reduced again. He said this was caused by the sluggish economy plus the rainy weather. He summed up saying, “There is room for import PP prices to soften considering the delta between local and import prices.”
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