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Will PP, PE and PVC extend gains into post-holiday period in Asia?

by Merve Sezgün -
  • 23/01/2020 (03:31)
With polymer players in China and in most Southeast Asian countries exiting the market for the lengthy Lunar New Year holidays, expectations about the post-holiday period are being voiced during the final few trading days.

Import PP, PE and PVC prices in Southeast Asia have been mostly firming up since last month, as reduced supplies helped the market sentiment improve. As for China, import PE and PVC have also witnessed price gains, yet PP has failed to follow suit so far. Players are now discussing the factors that will contribute to, or adversely affect, supplier’s firm stance after the holidays.

Scheduled shutdowns boost polyolefin prices

In the first quarter of the year, several PP and PE plants are scheduled to be shut for maintenance both in Asia and in the Middle East. This was the main factor that encouraged suppliers in the first place to adopt a firm stance in early January. Despite a pre-holiday lull in business activity, they have applied consecutive increases on their offers – particularly for PE – to most Asian markets.

“Sellers are likely to maintain their current stance in February by citing supply restrictions,” a few players noted.

SE Asia starts to receive Feb PP, PE offers

This week, a Middle Eastern PE producer announced $10-20/ton higher offers for February to Southeast Asia, followed by a regional producer implementing more visible hikes of $60-80/ton on its February PP and PE prices to Indonesia.

“February offers are up with support from reduced supplies. However, we are not feeling sure as to whether or not demand will be strong enough to absorb further hikes as the upcoming capacities in the region might weigh on the sentiment over the near term. Prices might be largely stable in the first couple of weeks after the holidays,” a regional trader opined.

In addition to the capacity additions for both PP and PE, the region’s import PE market will continue to face pressure from competitively-priced US cargoes this year, as China will not lift tariffs on US LLDPE and HDPE according to the phase one deal.

“Players worry that HDPE prices may resume their weakness because of high supply from the US and lower demand amid a ban on single-use HDPE bags,” the trader added.

China’s PE market also sees supply-driven hikes; PP remains soft

China’s import PE market has also been boosted by lower Middle Eastern supplies, recording gains since prices rebounded from an 11-year low in December. PP, on the other hand, have been largely stable to softer as the upcoming new capacities at home have kept demand subdued.

A seller said, “Local polyolefin supplies will increase during the lengthy holiday as major domestic producers will continue their production. Plus, both PP and PE futures on the Dalian commodity Exchange have been weaker amid the recent downturn in the crude oil market. We expect prices to track a stable to softer trend after the holidays on a combination of increased supply, limited demand and weaker oil futures.”

In the meantime, the ongoing slowdown in China’s economic growth is also casting a shadow over post-holiday expectations in all polymer markets.

Asian PVC at 4-month high ahead of holiday

Asian PVC markets are entering the holiday on a firm note as data from ChemOrbis Price Index reveal that the weekly averages of prices on CIF China/SEA basis are hovering around a four-month high.

Prices have been increasing since last month in line with a major Taiwanese producer’s higher January and February announcements, which were followed by other suppliers in Asia.

Most players now believe that tighter supply due to turnarounds will support PVC prices after the holidays.

Indonesia’s Asahimas is planning to shut its three VCM units in Cilegon consecutively from mid-January to early March, which implies less PVC due to reduced feedstock. Japanese producer Taiyo Vinyl plans to shut its PVC unit in Yokkaichi in early March for maintenance. Further support is likely to come from reduced operating rates from Taiwanese producers as Taiwan celebrates Chinese New Year from January 24 to 29.
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