Upbeat outlook for India’s PP, PE markets prevails despite China’s faltering

Import PP and PE import prices have stayed on an uptrend from the previous month, with a tighter supply situation continuing and in line with the market strength in other Asian markets. Most players expect the upbeat sentiment to remain in both the markets in the near term, too.

Although a sustained strengthening of the Asian markets has not materialised after the Lunar New Year holidays, despite the easing of stringent COVID restrictions in China, Indian prices have continued to rise, mostly on the back of run rate cuts in origin markets as well as an increase in feedstock costs. The plastic industry’s wish for customs duty on polymer imports to be lowered from the current 7.5-10% to about 5% went unheeded this time.

Budget falls short but markets stay bullish

Infrastructure sops in the budget have mostly been focused on the urban areas, with rural irrigation and other infrastructure developments mostly being given the cold shoulder. In fact, rural development has seen an allocation of allocated INR1576 bn ($19 bn) in the Union Budget for 2023-24, around 13 per cent less than the estimated expenditure made by the concerned ministry.

Despite actual budget allocations not being in line with market expectations, an upbeat sentiment was noted in the polyolefin markets. “We expect the markets to either remain stable or post small increases next month too,” said a Mumbai-based trader.

“All PE and PP supplies are tight in India although demand is not so great. There are import offers from China into India but not to the extent that people would be expecting. We wanted 1000 tons of homopolymer raffia but a seller from China could ship only 100 tons. The Chinese are selling re-export shipments of PE, as the shipments come in, as the demand in that market is not too great,” he said.

“At the same time, there’s a propane crunch in the Middle East that’s certainly affecting regional PP prices. Feedstock costs in the Middle East have risen and they’d have to raise prices. Meanwhile, in India all manufacturers have raised local prices,” he added.

Markets swayed by cost push

A marketing official with a major producer in the country pointed to the cost pressure on the market. “Crude oil and feedstock prices have not come to levels that are profitable, considering the current prices of the different PP and PE grades that we sell,” he said.
“We’ve continued to raise domestic prices as we need to keep our margins intact. This would mean import prices also rising in tandem,” he added.

“We’ve seen a continuing improvement in the overall market sentiment over the last couple of months. Prices have continued to rise. And, it continues to be a gradual increase, rather than steep spikes, that perhaps augur well for the polyolefin markets in the long run,” said the producer source.

CIF India prices have risen by $20-40/ton since mid-January. Import prices of HDPE film and LLDPE film were both quoted in a $1080-1130/ton CIF India band currently, against prices noted at $1050-1110/ton and $1060-1120/ton respectively, with the same terms, as of the week ended on January 20. As for LDPE film, CIF India prices were reported at $1150-1190/ton, from $1120-1150/ton in the previous month.

At the same time, homo-PP raffia prices have seen a sharp $100/ton increase from the levels reported in mid-January at a $1080-1130/ton CIF India band currently. “The higher PP prices are possibly a reflection of the higher capacities taken offline. We may possibly see a moderation in the increases as we step into March,” the trader noted.

Capacities lost hit Indian import prices

Capacity cuts in global markets continued to have an impact on the Indian markets. According to ChemOrbis Production News Pro, around 1.2 million tons of PP output was lost in February, about half of which was in Northeast Asia. Up-to-date data suggest that around 875,000 tons of PP will be cut from the markets in March, with a big part of the loss again coming from Northeast Asia.

As for PE, slightly more than 900,000 tons per day was removed from the global market in February, with notable capacity losses coming from China (28%), the US (12.6%), France (7.7%), and India (about 6%). In March, around 575,000 tons of PE resin are expected to be removed from the market.

Indian producers cut run rates to stay profitable

In India, public sector producers GAIL and Haldia Petrochemicals are thought to be running below capacity. Reliance also may not run 100% of its polyolefin plant capacities in March as it didn’t want operations to affect margins.