PP softens, PE firm: India's polyolefins market in July drift

India’s PP prices experienced a softening trend through July, primarily due to rising inventories among both producers and buyers. This accumulation weighed heavily on market sentiment, transforming it into a “buyers’ market”. Conversely, PE found support from firmer Middle Eastern offers, though overall momentum remained scattered amidst the monsoon season’s typical demand slowdown and logistical hurdles.

"Monsoon rains often leave market participants guessing," observed a Mumbai-based trader, highlighting the inherent uncertainty of this period. This cautious "wait-and-watch" approach, common during the second month of the monsoon, generally leads to stable or declining price trends across most PE grades.

PP suffers from ample supply, buyer pushback

ChemOrbis data indicated that July import prices for Middle Eastern-origin PP raffia were assessed at $930-960/ton CIF India, a marginal $5/ton drop at the midpoint compared to June. While some Saudi offers approached $980/ton, buyers resisted firmly, with most transactions reported below the mid-$900s/ton. The arrival of competitively priced Chinese cargoes in the low-$900s/ton added pressure on Middle Eastern suppliers to adjust their offers downward.

The significant inventory build-up, coupled with weak buying appetite, has resulted in dwindling deal volumes. Converters are prioritizing immediate production needs, hesitant to expand inventories amidst subdued end-user demand and broader economic uncertainties. This domestic scenario is mirrored in international markets; with weak demand in key destinations for Middle Eastern cargoes like Africa, Turkey, and Egypt compelling regional suppliers to Indian markets to adjust their pricing.

PE sees mixed trends with an HDPE anomaly

The PE market demonstrated greater stability. LDPE and LLDPE film saw their midpoints hold steady, with the current assessed ranges at $1130-1180/ton and $910-940/ton CIF, respectively. However, the HDPE film segment proved an interesting exception, registering a $15/ton uptick at its midpoint to reach $900-940/ton CIF India. This increase, defying the general market lethargy, points towards potential supply-side pressures or cost-driven adjustments.

Conflicting signals emerged from energy and feedstock markets. Brent crude futures rose by approximately 4% over the past month, suggesting an upward push on upstream costs. Yet, naphtha prices, a more direct input for polyolefins, slightly declined by $5/ton to $574/ton CFR Japan. Similarly, ethylene prices dipped by $30/ton to $820/ton CFR China. This divergence implies that the recent rise in HDPE film prices may not solely be justified by feedstock costs.

Anticipation of renewed buying for post-monsoon demand

As the monsoon season approaches its typical end in September, market participants are eyeing a potential shift in momentum. Historically, the post-monsoon period often ushered in a resurgence of economic activity, particularly in rural areas, leading to increased demand for various goods and materials, including polyolefins.

A Mumbai-based trader anticipates that pre-buying activities could commence as early as mid-August. This expected demand surge could be further supported by a potential tightening of PE supply from the Middle East and short-term capacity reductions by some domestic Indian producers. While current inventories remain ample, the seasonal uptick in consumption could gradually absorb this overhang. Converters, who have been maintaining lean inventories, are likely to replenish stocks in anticipation of improved market conditions, leading to a more balanced supply-demand dynamic.

Summing up, while PE prices have shown relative resilience, particularly the unexpected strength in HDPE film, PP continues to grapple with oversupply and buyer resistance. The polyolefins markets now await the waning of the monsoon, hoping for the traditional surge in demand to inject fresh life and clearer direction into pricing.