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Tightening supplies embolden PP producers to hike prices in SE Asia

by Shibu Itty Kuttickal - sikuttickal@chemorbis.com
  • 20/09/2022 (09:20)
Despite resistance from buyers, import PP markets in Southeast Asia have risen as producers held back on offers hoping for prices to rise and supplies kept tightening as a result of a prolonged period of buying inactivity.

Cracker shutdowns across Asia have crimped propylene supplies, forcing PP producers to cut run rates at a time when lower prices were squeezing margins.

On September 15, import prices for all origins were assessed $30-50/ton higher over the week at $1050-1100/ton CIF Southeast Asia, cash, for import homo-PP raffia and inj, and at $1070-1130 CIF, cash for import PP block copolymer. ChemOrbis Price Wizard shows both price indices had fallen below the previous lows hit in Sepember-October 2020, before rebounding last week. PP prices in the region had fallen by about 30% since end-March.

PP –Southeast Asia

Requirements ahead of year-end, China’s Golden Week

Traders said offers were being raised in the region in the name of limited supplies as well as PP requirements ahead of the Chinese Gold Week in early October and for year-end consumer demand across the globe. “There’s been an extended period of buying inactivity that has tightened supplies on the buyers’ side as they kept waiting for prices to fall. As buying and selling ideas have not been meeting, deals have been limited,” a regional trader said.

“Demand remains weak but sellers are trying to raise prices because of limited supplies, apart from requirements ahead,” said a converter in Vietnam. “A South Korean producer raised PP prices by up to $100/ton from last month’s levels because of a supply tightness. But most buyers are still not about to pile up stocks and are buying only for immediate requirements,” he added.

Apart from regional players, Middle Eastern sellers have also upped prices. “A Saudi producer raised October offers to $1100/ton, although we’re not sure about the price they’ll be willing to conclude a deal,” said a trader in Malaysia.

Cracker issues and refinery turnarounds support bullish sentiment

Meanwhile, cracker issues and turnarounds in Thailand and Vietnam, as well as deeper cracker cuts in South Korea and Taiwan, have also cut September and October regional olefins output.

Traders expect propylene prices may rise in Southeast Asia, as there are buyers needing more product. Meanwhile, scheduled maintenance turnarounds are ongoing at India’s Reliance Industries and Indian Oil Corp since early September.

“Our cracker is shut till October forcing us to run our PP lines at low rates as we don’t have enough monomer volumes to run plants at full capacity. Although demand is also not great, we’re under no pressure to sell any excess stocks,” a Southeast Asian producer, implying price increases ahead, after hikes announced earlier in the week.

More price hikes likely ahead

“There have been claims of lack of supplies leading to a general feeling of tightness in the market. Sellers are trying to make use of this feeling to raise prices and do not seem to be in a mood to give in to buyer resistance,” said a trader based in Vietnam.

“Sellers are likely to try and raise prices further this month because of limited supply although the demand is weak,” added another trader, also in Vietnam.

Crude oil price slide clouds hike attempts

One factor that could work against the current bullish outlook is the latest slide in crude oil prices.

On Monday, oil prices slumped, falling by more than 3% on fears that slowing global economic growth will weigh on crude demand ahead of likely new large interest rate hikes by a number of central banks, including the Federal Reserve. But the current shortage of propylene supplies could still keep the PP market tighter and help prices rise, traders said.
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