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Vietnam PP and PE markets buckle under stalling demand and excess import supplies

by Shibu Itty Kuttickal -
  • 02/11/2022 (02:36)
Suppressed demand has kept PP and PE markets in Vietnam bearish, with buyers out only for immediate requirements, taking prices to new lows for more than two years. Import supplies from the US and re-exports from China are also denting hopes for a revival in market sentiment.

Market players expect demand to remain limited to immediate requirements amid fears of a recession and other economic uncertainties looming large. Availabilities of shipments from the US, where players try to pare down inventories ahead of the year end, from China, hit by a vexed COVID situation, and elsewhere have hit both PE and PP markets.

PE, PP prices fall by 21-27% since June

ChemOrbis Price Wizard shows import and domestic PPH raffia prices in Vietnam have fallen by 22-25% since early June. In the week ended October 29, import prices were assessed at $930-1050/ton CIF Vietnam, cash, while domestic prices were assessed in a VND26,400,000-27,000,000/ton ($973-995/ton, excluding VAT) FD, cash inc VAT range.

Vietnam – PP – Import – Local – CIF- FD

As for PE, ChemOrbis Price Wizard shows import LDPE prices in Vietnam falling by a steep 27% over the same period, while HDPE and LLDPE prices were down by 17-21%. In the week ended 29 October, import LDPE prices in Vietnam were assessed stable to $20/ton lower from the previous week at $1100-1200/ton CIF, cash, while HDPE and LLDPE prices were stable to $20/ton lower at $1000-1060/ton and $970-1060/ton respectively, on the same basis.

Vietnam – LDPE – HDPE – LLDPE - CIF – Import

Domestic prices have fallen by 26% for LDPE film and by 20-21% for HDPE and LLDPE film since the first week of June. As of the week ended 29 October, LDPE prices were assessed stable from the previous week at VND32,500,000-33,000,000/ton FD, cash inc VAT ($1198-1216/ton without VAT). Prices were assessed stable to VND500,000/ton ($20/ton) lower at VND28,000,000-28,500,000/ton ($1032-1050/ton without VAT) for LLDPE film, and VND27,500,000-28,000,000/ton ($1013-1032/ton without VAT) for HDPE film, all FD, cash inc VAT.

Buyers are not tempted by lower prices

Sellers kept lowering offers to Vietnam and to the rest of Southeast Asia, but they complained that buyers kept waiting for still lower prices. “Buyers just don’t seem to be showing any signs of interest. They are currently mostly interested in buying locally, perhaps to avoid losses from currency rate fluctuations,” said a regional agent of a major Mid-eastern producer.

“Demand for end-products is also weak. Converters are minimising operational rates and inventories. Generally, they expect prices to continue falling and are not in a mood to take any risk at this moment,” he added.

Converters prefer local sources to imports

Another converter said, “Demand is too weak and we don’t intend to replenish at this moment. Instead, we’d prefer to buy locally as prices in Vietnam are lower than imports. We’ll look at imports only if we can’t find material in the local market.” Generally, players expressed a stable-to-softer outlook for the market going forward.

Saudi PE offers to Vietnam extend slump to November

According to a trader, a major Saudi Arabian producer approached the Vietnamese market with November price cuts of $50/ton for LDPE film and $20/ton for HDPE film. The producer’s LLDPE film offers were stable to $10/ton lower from October. “Demand is weak, buyers expect prices down further, so they don’t want to take any action at this moment,” the trader said.

Another trader in Vietnam reported that a different Saudi producer also lowered November PE offers to the country by $20/ton. “LLDPE supply is quite limited, so the price level is mostly notional. We are waiting for the market’s feedback for the latest offers,” he noted.

Re-export offers from China and import US supplies cause jitters about possible supply glut

“Demand is too weak and we expect prices to keep falling,” a trader said. A converter reported receiving a good number of re-export offers of Middle East origin shipments from China. “We expect more such offers ahead as the Chinese pandemic situation shows no improvement. US PE offers are also likely to increase ahead of the year-end,” he added.

US shipments remain a concern for sellers in the region. Should more US cargoes head to the region, the downtrend might gain speed. Players expect more PE exports from the US in Q4 thanks to the country’s easing logistics constraints and as inventories are decreased ahead of the year end.

Sellers point to lower run rates, buyers to weak demand

At the same time, sellers are apparently not facing too much supply pressure as a result of ongoing operational rate cuts in both polyolefin and converter plants, as well as maintenance shutdowns in the region. Lower output in refineries in the Middle East could still prove to be a boost for sellers in Southeast Asia.

But despite producers pointing to low production margins, high utility costs, and limited supplies amid reduced run rates, they have had to abandon their firm stances on offers so far in the face of sluggish demand.

“The number of offers is limited as sellers ask buyers to bid first. Buyers’ bids are at around $900/ton for PPH raffia. We think that the market should see this level very soon. We haven’t faced such weak demand since 2009. Our factory is full of raw materials and end products amid a slump in orders,” said a woven-bag maker in Vietnam, referring to the current demand situation.
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