Trades in Southeast Asia’s polyolefins market are being stalled by slumping crude values, which will likely continue dragging polymer prices down, as per industry sources in ICIS.
On 7 November, dutiable polypropylene (PP) flat yarn prices were assessed at US$1470-1,490/ton CFR (cost and freight) SEAsia. Dutiable high density polyethylene (HDPE) film prices stood at US$1480-1510/ton CFR SE Asia. PP flat yarn import prices in SE Asia have shed US$50-60/ton by the week ended 7 November from $1,520-1,600/ton CFR SE Asia four weeks ago, according to ICIS data.
The downtrend has accelerated since mid-October, when crude prices tumbled and have remained weak amid an oversupplied market. Regional prices have been mirroring sharp declines in the key China market. PP prices may fall further as producers have recently been offering competitive prices to induce trades, an Indonesian trader said. HDPE prices, on the other hand, have been falling since late July, according to ICIS data. PE is seeing an unusual sluggish trade, market sources said, citing that buying activities for the polymer are traditionally strong towards the end of the year. Despite the upcoming festive season, further declines are expected due to concerns over the global economy and a lack of recovery signals in China. Conventionally, demand for downstream plastic packaging typically increases ahead of the Monkey Buffet Festival, which is celebrated in Thailand in end-November. But not this time. Currently, end-users are buying only small volumes to cover immediate requirements as they seek a clearer price direction, a Vietnam-based trader said. Buying sentiment in China, which is a major importer of polymers, and southeast Asia weakened over the course of 2014, with growth rates in China waning to a five-year low of 7.3% in the third quarter. Weak demand is partly attributed to the depreciation of most southeast Asian currencies against the US dollar in the third quarter, that diminished the region’s purchasing power for imported commodities. Heavy start-ups of coal-to-olefins and methanol-to-olefins plants in China are also likely to exert downward pressure on polymer prices in this region. Several southeast Asia-based producers raised their concerns about matching the expected lower offers from Chinese suppliers. In the Middle East, increased supply from UAE’s Borouge is expected to exacerbate the supply glut- Fresh supply from Borouge 3 in Abu Dhabi is expected to hit the markets by end-2014 or early 2015.