Asian polypropylene prices rebound by $20 after breaching new lows of US$1180

16-Oct-08

Feedstock propylene prices fall to a new low of US$860/MT CFR China and prices in Asia for raffia/injection grade PP breached fresh lows of US$1180/MT CFR China mid week, before rebounding by twenty dollars. The direction of prices is contrary to expectations that market demand will revive when China returns from its week long National holidays. The interesting phenomenon is that though prices have tanked drastically, it has failed to stimulate buying. As per Platts, a conservative per ton US$150 margin between polypropylene and propylene for non-integrated producers indicates that PP prices could drop to US$1010 levels. Despite precariously depleted inventory levels, as feedstock propylene prices plunge further, anticipation of a further price dip continues to keep buyers in the sidelines. Also, demand from China continues to be lackluster as depleting consumer spending in USA has affected exports and led to enlarged inventories with processors. The banking crisis seems to have given way to recessionary concerns, keeping long term outlook negative. In view of the continuing global economic turbulence and volatile crude values, PP prices are not expected to rebound in the short term.