PP block copolymer prices dip under homo-PP in Asia

In the Chinese market, prices of PP block copolymer injection grade (PPBC) have been coming down for the last seven weeks along with homo PP prices. PPBC, which traditionally carries a premium over homo PP, saw prices dip below homo PP at the start of June as per ChemOrbis. In fact the last time PPBC prices dipped under homo PP was in June 2008, according to ChemOrbis Price Indexes. Currently, average domestic PPBC prices in China are US$33/ton below the average of homo PP prices. One major home appliance manufacturer said, “The prices we received this week are lower than last week because there is plenty of supply of PPBC while demand from buyers is poor. We expect prices to slip a bit further in the short term because of the demand and lower propylene costs.” Sales offices of the Chinese producers reported offering PPBC at prices up to CNY150-550/ton (US$23-85/ton) below their homo PP prices. A source at one of the offices commented that many producers had been producing PPBC earlier in the year because of the healthier margins and the ease to produce PPBC with the new technologies available. He said this led to an oversupply situation since demand has not been as high as expected. The month of June is traditionally a weak season for home appliances and automobiles, which are major markets for PPBC, whereas demand for homo PP from woven sack converters does not see the same kind of slowdown in June. Market players in the north and east of China blamed low priced PPBC from the new capacity of 450,000 tpa of Sinopec-Sabic Tianjin for the current poor performance of PPBC relative to homo PP. Apart from the ramped up production of PPBC inside the country, imports were also at a healthy clip this year. According to ChemOrbis import statistics for China, the import volume of PPBC between January and April 2011 reached 302,000 metric tons. This was higher than the same period of last year at 269,000 metric tons. On the other hand, the import volume of homo-PP from January to April 2011 was 1.25 mln metric tons, which was lower than that of last year at 1.3 mln metric tons. In the import market, the premium on PPBC prices remains in place, however, the gap separating the average levels for both products is the lowest it has been since the start of the year and the lowest seen over a one year period as per the plastics pricing service ChemOrbis. PPBC is currently priced on average US$43/ton above homo PP import prices. This is down from the US$81/ton gap seen in last week’s price ranges. One overseas PP producer commented that there are more tax-refunded woven sacks converters in China who use homo PP than there are home appliance and automobile manufacturers using PPBC. He also noted that most of the home appliances and automobiles are sold domestically in China while the woven sacks converters are export-oriented. Therefore when local materials are more competitive, only converters who receive tax refunds are likely to accept the US dollar based import prices. A similar situation was observed in Southeast Asia. This week a major regional producer reported that they reduced their PPBC prices by US$130/ton compared to the end of May and by US$100/ton for homo PP. After the price reduction the producer is now offering PPBC and homo PP at exactly the same price to Southeast Asian buyers.