Higher PP offers to SE Asia from regional producers

27-Apr-10
Regional producers in Southeast Asia have announced higher offers for the week to both local and regional markets, as per Chemorbis. Despite unchanged demand, prices have been propped by squeezed margins as a result of high propylene feedstock costs. Although converters still maintain that they expect to see lower prices emerging over the next few months with the onslaught of new capacity additions, several buyers reported making purchases this week to meet immediate needs as they feel that prices may remain on a firmer trend over the next few weeks. At the beginning of the week, two Southeast Asian producers increased offers by US$20-60/ton when compared with their prior offer levels. These increases were expected by the market as spot PP prices last week were insufficient to cover producers’ theoretical production costs based on spot propylene prices, as well as on support from a stronger PP market in China. Producers are planning to take a firm stance on their offers for the present, and since demand is normal, customers will eventually accept their new price levels. A converter in the Philippines reported making a few purchases at the new price levels, ruling out plans to build up any stocks for now as they still expect to see lower prices over the medium term. Producers in the region’s local markets also began the week by announcing higher prices to their markets. A producer in Indonesia announced a US$20/ton increase on homo-PP offers at the start of the week, supported by high propylene feedstock costs as well as better demand in the local market. Distributors also lifted their offers to the local market this week, although distributors did not match the full extent of producers’ US$20/ton increase. Distributors acknowledged that demand is better in the local market vs the past week, though demand is still less than encouraging. On the converters’ side, a woven bag manufacturer complained about poor operating margins at present and that demand for their end products has not improved recently. The buyer added that producers are taking an increasingly firm stance on their offers, making it difficult to persuade suppliers to grant them any discounts for firm bids.
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