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Tightening supplies underpin PE market in India; PP prices rangebound

by Shibu Itty Kuttickal -
  • 08/05/2024 (09:36)
PE availability has tightened in India over the last one month taking prices slightly higher, although PP prices have been rangebound. The markets have also been underpinned by the country’s manufacturing activity strength and high oil prices, apart from PE maintenance turnarounds in Middle East plants in the second quarter.

Strong demand, supply squeeze lift LDPE

LDPE supplies in India’s domestic market is thought to have been restricted, with international arrivals falling and because of a planned shutdown at an Indian producer’s plant. “LDPE prices are currently on an uptrend. We are currently seeing good demand for LDPE, even as availabilities have been squeezed because of maintenance turnarounds at Middle East plants,” a Delhi-based trader said.

Indications in the market pointed to import LDPE film prices to India hovering slightly below the $1200/ton CIF mark, mostly in a $1150-1180/ton range. An offer from the Middle East was reported at $1200/ton CIF but could not be confirmed. In comparison, tradable levels for LDPE film in early April were noted mostly below the mid-$1100s/ton, with the low-end as low as $1100/ton CIF India.

Higher prices noted for LLDPE

In the import LLDPE markets too, price indications were higher compared to a month ago, amid a pickup in demand. “We don’t see any higher LLDPE availabilities in the Indian local markets that can hit import prices of the grade,” a Mumbai-based trader said.

In early April, low-end prices of LLDPE film were noted as low as $900/ton CIF India, from the mid-$900s/ton about a month ago, while at the high end, sellers were finding it hard to maintain prices above the mid-$900s/ton. However, current prices were mostly well above the mid-$900s/ton at the low end, while the high end saw prices up to $990-$1000/ton CIF India.

Better demand, tighter supply in HDPE

Market participants reported a higher price trend in the HDPE market. “We’re definitely seeing a price uptrend as the HDPE supply is tighter in the local markets, which has spurred more buying activity,” the Mumbai trader said.

HDPE film prices were noted at $1000-1030/ton currently, up from a $985-1020/ton range noted a month ago. “We see import supplies further getting crimped by the turnarounds in the Middle East,” the trader said.

PP raffia levels rangebound

At the same time, traders reported PP availabilities were easier in India, compared with that of the PE grades. “The easier supply for PP means prices haven’t climbed that much compared to PE,” a trader said.

Traders noted homo-PP raffia prices in a $990-1030/ton range in the current market, compared to the $990-1025/ton range reported in early April.

Macro-economic factors emerge stronger

In April, the country’s manufacturing activity registered its strongest expansion in three-and-a-half years, bolstered by strong demand. The HSBC India Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, in April stood at 58.8 — the second strongest since the beginning of 2021. The survey noted expectations that demand conditions will remain conducive to growth supported inventory-building initiatives.

More good news emerged with the International Monetary Fund (IMF) raising its growth projection for India’s GDP in the current fiscal year to 6.8% and forecast 6.5% growth for 2025. The latest forecast is a 0.3 percentage point increase from the projection by the IMF in January. Major players have expected demand to rise, especially as the construction industry could get a boost in the next budget, which is expected to be presented in July, once a new government is in place after the ongoing elections to the Indian parliament. Most surveys predict the current ruling front, the National Democratic Alliance led by the BJP, to return to power after the election, regarded as a positive factor by the markets.

Meanwhile, although energy and feedstock costs have slid recently, these have been maintained at higher levels over the long term. Crude oil prices have fallen by about 8% over the last one month, but the current Brent crude futures are still at levels above $80/bbl, traders point out. As for ethylene, prices have slid by about 8% over the last two months to about $880/ton CFR China. As feedstock naphtha prices have stayed at high levels, traders expect ethylene prices to rise, especially as South Korean cracker operating rates are being cut back to protect margins.
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