SE Asia PP and PE shrug off oil rebound as weak demand outweighs geopolitical fears

After weeks of steadily declining energy markets, renewed geopolitical tensions around the Strait of Hormuz briefly revived supply concerns across Asia. Fresh US sanctions on Iranian oil exports, attacks on commercial shipping and a sharp rebound in crude oil pushed upstream sentiment higher, prompting some polyolefin suppliers to withdraw offers and reassess pricing strategies.

Yet Southeast Asia’s PP and PE markets barely reacted. Instead, abundant regional supply, aggressive competition among multiple origins and persistently weak downstream demand continued to outweigh higher feedstock costs, extending the region’s downward price trend despite the return of geopolitical risk.

Yet Southeast Asia’s PP and PE markets showed little immediate response. Instead, import prices extended their downward trend this past week as ample regional supply, intense competition among multiple origins and persistently weak downstream demand continued to outweigh higher energy costs. Rather than triggering panic buying, the renewed uncertainty prompted many buyers to postpone purchases until a clearer direction emerges.

Market fundamentals continue to outweigh higher oil

Although Brent crude climbed back above $78/bbl by mid-week, participants generally viewed the rebound as too recent and too limited to alter prevailing market fundamentals.

Asian propylene prices registered their first weekly increase in nearly three months, while ethylene prices also stabilized after a prolonged downturn. Nevertheless, buyers noted that polyolefin producers continue to face abundant regional availability and sluggish consumption, preventing the higher upstream costs from translating into firmer PP and PE offers.

Several suppliers reportedly withdrew quotations issued earlier in the week after crude oil strengthened, hoping to reassess the market before committing to fresh sales. However, these withdrawals remained isolated, with most suppliers maintaining competitive offers in an effort to secure business.

"There is more uncertainty now, but not enough to change pricing," a regional trader said. "Unless oil continues rising sharply or the Strait of Hormuz faces an actual disruption, buyers are unlikely to change their strategy."

Buyers adopt wait-and-see stance as uncertainty grows

The renewed geopolitical risks reinforced an already cautious buying mentality across Southeast Asia.

Converters in Vietnam and Malaysia continued purchasing only immediate requirements despite receiving increasingly attractive import offers. Many said inventories remained comfortable, while unusually wide price gaps among different origins and poor visibility over producers’ stock positions discouraged larger-volume commitments.

Rather than rushing to secure material ahead of possible supply disruptions, buyers largely preferred to wait for clearer signals from both the energy markets and regional producers. Market participants said sentiment had shifted from expecting continuous price declines to questioning whether the recent rebound in oil could be sustained, although few believed this alone would reverse the current downtrend.

Aggressive competition keeps pressure on PP and PE

Despite the rebound in upstream markets, supplier competition remained the dominant pricing driver throughout the week.

In PP, the steepest revisions came from Middle Eastern suppliers, whose offers dropped by as much as $100-150/ton as they continued competing aggressively with Chinese and South Korean cargoes.

PE markets also extended their losses. Import LDPE film prices recorded the sharpest correction, falling by $100/ton at both ends compared to the previous week. LLDPE film and HDPE film prices also moved lower, pressured by abundant availability from the Middle East, the US, China and Northeast Asia.

Market participants said suppliers remained primarily focused on protecting market share rather than defending margins, reflecting the region’s persistent oversupply.

Most war-driven premium has already disappeared

Another reason behind the muted market response is that much of the geopolitical premium accumulated earlier this year has already been unwound.

According to the ChemOrbis Price Index, compared with the week beginning February 23, immediately before the outbreak of the US-Iran war, Southeast Asian import polyolefin prices now carry only a fraction of their earlier premiums.

Homo-PP raffia remains about $150/ton above its pre-war level, while LDPE film carries a premium of around $125/ton. HDPE film stands roughly $105/ton higher than before the conflict, whereas LLDPE film has retained only about $60/ton, indicating that this grade has already surrendered the vast majority of its war-related gains.

The sharp erosion of these premiums suggests that the market has largely repriced the earlier geopolitical shock. As a result, buyers appear less inclined to react aggressively to the latest escalation unless it develops into a prolonged disruption affecting physical supply.

Attention turns to Hormuz and crude oil

Looking ahead, players believe the trajectory of crude oil and shipping through the Strait of Hormuz will determine whether the current pause in sentiment develops into a broader market reversal.

For now, however, the consensus remains that supply-demand fundamentals continue to dominate Southeast Asia’s polyolefin markets. Unless geopolitical tensions materially disrupt exports from the Middle East or trigger a sustained rally in energy and freight costs, most players expect competitive supply and subdued demand to keep pricing under pressure in the near term.