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Weakening currencies exert pressure on SE Asia’s local PP, PE markets

by Merve Sezgün -
  • 11/10/2023 (23:22)
Most Asian currencies have tumbled against the US dollar due to rising interest rates and elevated commodity prices. Despite the recent faltering in import polyolefin prices amid subdued regional demand, players in Southeast Asia note that the weakening currencies coupled with some maintenance shutdowns have exerted upward pressure on local offers.

Indonesian producer lifts local prices for another week

A major Indonesian producer notified a fresh round of increases in its weekly price list on Monday. Accordingly, the producer raised PP and PE offers slightly by IDR140,000-170,000/ton ($9-11/ton) from the previous week.

The country’s domestic polyolefin markets have been mostly bullish since mid-June primarily due to high upstream costs. Some plant turnarounds in September coupled with a weaker rupiah have contributed to the upward trend, despite the recent corrections seen in the import markets.

The Indonesian rupiah lost more than 2.3% over the past month and has hit its lowest against the US dollar since December 2022.

Baht’s weakening pushes Thai PP, PE higher despite buyer resistance

A weakening baht, along with reduced local supplies led to further increases of THB250-750/ton ($9-28/ton) in Thai local prices for PP and PE last week. The domestic polyolefin market has been stable to firmer since July, yet ChemOrbis Price Wizard reveals that prices in dollar terms have shown decreases for most products, reflecting the sliding value of the local currency.

The Thai baht has lost more than 4% of its value over the past one month. In fact, the current year has seen the baht rank as one of the region’s worst performing currencies, depreciating to a low of 37.14 to the US dollar earlier last week – a level not seen since last November.

“Polyolefin producers are in a challenging situation, grappling with high production costs and weak downstream demand. Despite resistance from buyers, suppliers find themselves with no other option than to adjust offers in line with the weaker local currency,” commented a trader in the country.

PP offers adjusted after dong’s slide in Vietnam; PE fails to follow suit

In Vietnam, local PP offers were also revised higher by around VND400,000-500,000/ton ($10-12/ton) last week, while suppliers failed to sustain a firm stance on PE prices given persistently weak demand.

Players attributed last week’s PP increases to the depreciation of the Vietnamese dong against the US dollar, while acknowledging that the market lacked support from the demand front. “Sellers have indicated that prices might increase further due to the high exchange rate. However, subdued end demand remains a concern,” said a PP converter.

The US dollar has increased over the dong by 3.54% since the beginning of the year. Last week, the dong depreciated to a low of 24.49 to the US dollar – a level not seen since last December.

As for the country’s local PE market, however, the weakness in demand outweighed the high exchange rate, as sellers either kept offers stable or applied slight decreases to entice buyers last week.
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