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Will China’s recovery mitigate bearish pressure on SEA PP market?

by Merve Sezgün -
  • 09/04/2020 (04:07)
In Southeast Asia, import homo-PP prices hit more than 11-year lows last week. The market has been rather quiet since early this week as players are now looking to see if the recovery in China would impact the regional sentiment. Some sellers were reluctant to repeat last week’s low levels, while buyers continued to bid lower as demand remained subdued amid ongoing coronavirus lockdowns.

Firmer futures boost China’s PP market

After hitting the lowest levels not seen since late 2008, China’s homo-PP market has seen some stabilization or even price hikes as ending lockdowns and firmer futures have boosted domestic demand.

“China has eased social restrictions with COVID-19 being brought under control. Increasing economic activity and higher production rates at downstream factories have boosted the sentiment,” a trader commented. Both local and import PP prices in China have firmed up this week.

The seller added, “But we should be aware of the fact that the market recovery will be at a moderate and gradual pace as overall polyolefin supplies remain above 1 million tons inside the country and demand from export markets is yet to improve due to COVID-19.”

Sellers reluctant to make further price cuts to SEA

In Southeast Asia, meanwhile, PP sellers have been reluctant to apply further reductions on their offers this week, while some of them have even raised prices by pointing to the latest developments in China.

“PP prices on CIF China basis have rebounded on the back of rising futures. Demand is gradually improving there. We would focus on China rather than chasing buyers in Southeast Asia,” a trader noted.

Homo-PP raffia prices for Middle Eastern origins are largely stable on the week at $750-800/ton CIF SEA, cash. Buyers’ bids, however, are reported at around $700/ton CIF.

Lockdowns continue to dampen regional demand

PP demand from downstream markets has taken a hit from the nationwide lockdowns across Southeast Asia. Almost every country in the region is now in varying degrees of lockdown.

“There is hardly any downstream or derivative production or demand to talk about. Regional demand remains abysmal amid the COVID-19 pandemic,” a Singapore-based trader lamented.

Despite the recent price recovery in China, Southeast Asian PP buyers have continued to place lower bids or ask for last week’s low levels.

A converter in Thailand said, “The uncertainty over the impact of coronavirus grows.

Regional demand is weak amid reduced manufacturing activity. We believe that PP prices still have room for further declines under the current conditions.”
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