Shipping issues, COVID restrictions dampen PP sentiment in Thailand

Logistics issues from restrictions as a result of a second wave of COVID-19 infections in Thailand has affected the PP market.

A local trader said, “A wide range of businesses are affected. The two main business areas are involved and lots of light industrial manufacturers near the south of the capital Bangkok and the eastern seaboard containing the oil refinery, petrochemical/industrial complex have been marked as high risk for the pandemic.”

“Many intensified measures have been issued by the government to curb the spread of the pandemic. Lots of plastics converters have had to slow their production rates because of logistics problems due stricter restrictions for movement in and out of the area,” he added.

Thailand kept the number of COVID cases low for most of last year but a second outbreak in December has brought confirmed infections to more than 12,000 and 70 deaths.

The fresh spike with more than 200 cases daily has led the government to issue restrictions that have raised fears that it may slow the economic recovery.

A market expert estimated that demand for material consumption could be reduced by 15-20% as a result of the restrictions. According to a World Bank projection in October, Thailand’s economy is estimated to contract 8.3-10.4% last year.

Domestic prices down 3% amid higher inventory

Reflecting the subdued market sentiment, homo-PP raffia prices have been edging lower.

Domestic prices fell from $1355/ton to $1334/ton FD Thailand last week and were down 3% from $1375/ton at the end of last month, according to the weekly data from ChemOrbis Price Index.

Import prices, meanwhile, edged lower from $1225/ton to $1210/ton CIF SEA last week. The weakening in import prices stretches back to early December.

Prices are also being pressured by higher inventories among converters.

An end-product maker explained, “Re-export converters are having problems because of the shortage of containers and high freight rates which has resulted in them having high stocks of finished products.”

In addition to weaker downstream demand due to lower production rates and high stocks, shipping issues also affect manufacturers as around 40% of Thailand’s PP capacity is estimated to be exported.

Chinese New Year effect may add to weakness

There are few incentives for a pickup in Thailand’s PP market in the near term as business activity is likely to thin heading towards the Chinese New Year holiday, which starts on February 11. Thailand has a significant Chinese population with strong trade linkages to China.

The expected restart of PRefChem’s plant in Malaysia may also add pressure. “In March, PRefChem will be back in the market and for sure, they will put other producers under pressure,” a source at a Southeast Asian producer said.