Market and product

Spot polypropylene (PP) prices in Asia may come under pressure in May, as plant start-ups in China will augment supply while demand is still weak, market sources said on Thursday.

On 29 April, PP flat yarn was assessed at $970-990/tonne CFR (cost and freight) China, and at $1,030-1,140/tonne CFR SE Asia, ICIS data showed.

In late April, China Coal Mengda New Energy & Chemical Industry brought its new 300,000 tonne/year PP plant on stream. By the end of this month, a new 360,000 tonne/year PP capacity operated in Xinjiang Shenhua Chemical Industrial is also due to commence production.

Continued volatility in the PP futures, which largely track movement of upstream crude market, has kept end-users in China on the sidelines, market sources said.

Spot PP prices may be supported by restocking activities from manufacturers of home appliances ahead of the peak consumption season in the third quarter. But demand from the automobile sector is expected to be weak, they said.

Notwithstanding the market weakness, PP prices are not expected to go on a steep downtrend as inventories are low among local suppliers. There is no pressure to sell, market sources said.

The bearish outlook also pervades the southeast Asian PP market, with trades likely to stay thin throughout the month, traders said.

“The market is quieter as converters are taking a wait-and-see stance,” a southeast Asia-based trader said.

In Indonesia, converters were refusing to procure imported cargoes arriving in late June or early July.

“It’s difficult to sell dutiable PP origins now,” another trader said.

Most ASEAN PP producers were also not under pressure to offload cargoes in May and June, as they are currently in the process of clearing supply backlogs, market sources said.

“We may be able to clear all the pending orders by end-June,” a producer said.

In April, short supply had driven up prices in the Asian PP market, but the support collapsed under the weight of weak demand, market sources said.

PP flat yarn prices in China had gained $84.00/tonne from end-March, while those in southeast Asia were up $112.75/tonne over the same period, according to ICIS data.

Most suppliers maintained firm offers throughout April, while traders had lowered their prices later in the month to entice buying interest.

Chinese importers refrained from procuring cargoes, as converters preferred to buy local supply, which are cheaper by about $30/tonne compared with imported material.

In southeast Asia, PP buyers had been reluctant to procure deep-sea cargoes as they were expecting prices to decline in the near term.

A widening gap in the Chinese and southeast Asian import prices for PP to $50/tonne from the usual $20-30/tonne has also heightened the uncertainty in the regional market, industry sources said.