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Thailand local PP, PE prices hit new lows; traders see limited downside

by Abdul Hadhi - ahadhi@chemorbis.com
  • 27/08/2019 (04:08)
Domestic PP and PE markets in Thailand are in a downward spiral as a cyclical combination of weak demand and high inventory levels pushes prices to multi-year lows. However, the downside may prove to be limited in the short-term, considering a possible tightening in supplies amid planned outages in the region.

Domestic PE prices at 10-year lows; PP at lowest of only 2 years

Last week, local PPH Raffia prices reached their lowest since July 2017 while domestic prices of HDPE film, LDPE film and LLDPE C4 film were at levels not seen since 2009, according to data from ChemOrbis Price Index

As of the end of last week, local PPH Raffia prices were flat to THB1000/ton($33/ton) lower.

Meanwhile, local LDPE film was THB250-500/ton ($8-16/ton) lower while LLDPE film was down THB500-1250/ton ($16-41/ton). HDPE film prices were flat during the week.

Cyclical trend of weak demand and high inventory

Prices have been continually pushed southwards by muted demand, preventing stocks from being run down adequately. To clear high stocks, suppliers are pressured to lower prices even as inventory builds up further in a cyclical fashion.

A trading source suggested that there could even be oversupply with cargoes arriving from China while another source reported hearing there were a lot of plastic bags from China in the northern area near the border.

Reflecting the muted demand, suppliers said that customers were only buying when needed and not building up inventory.

But faced with high costs, some suppliers were unable to reduce prices, resulting instead in fewer sales and trades. A Southeast Asian producer was reported not to have any promotions or discounts because of high costs. While sales to some retail customers are continuing, major customers have been quiet, according to a market source.

Market to remain soft but shutdowns may limit downside

With the end-product market not being reported to be strong, local PE and PP prices may remain subdued, a trading and supplier source said.

But the rate of declines may slow as supply may be limited by plant shutdowns. PTT Global Chemical’s LLDPE unit at Map Ta Phut is having planned maintenance on September 7-8 while its 1 million ton LDPE unit will have maintenance over October 1-30.

While there are no PP plant shutdowns planned, the 800,000 ton Map Ta Phut Olefins propylene plant is due for maintenance in the fourth quarter, Chemorbis Production News database shows.

Nonetheless, the market mood is likely to remain cautious as trade tension between the US and China worsens, resulting in more tariffs. The tariffs on US PE have already prompted the diversion of these goods to Southeast Asia from China, thereby increasing supply and putting pressure on prices.
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