Asian PP buyers return to the market as upstream costs increase

The recent upward swings in crude oil and spot propylene prices have driven PP buyers to the market to make fresh purchases in Asia, as per Chemorbis. While sellers acknowledged seeing better demand at the start of the week, sellers continue to be cautious in their optimism as they remain skeptical of the medium term outlook for the market. Crude oil futures on the NYMEX gained US$2.44/barrel over the past week to settle at US$78.98/barrel on Friday, rising mostly towards the end of the week. Along with the rise in crude oil prices, spot naphtha prices on a CFR Japan basis gained US$38/ton over the past week, with most of the increases once again occurring towards the end of the trading week. Rising energy costs combined with renewed supply concerns following outages at Samsung Total’s petrochemical complex in Daesan and Formosa’s cracker in Mailiao led to a rally in the spot propylene market, with prices jumping US$30/ton FOB Korea over the past two trading days. While the outage at Samsung’s facility is expected to be resolved quickly, Formosa has announced plans of reducing the operating rates of its PP plants by 30% after a second fire broke out at the Mailiao facility over the weekend. In China, a distributor reported to have raised offers for locally-held copolymer PP by CNY300/ton (US$44/ton) as they have been receiving a good number of price inquiries from their customers. Domestic producers also reported seeing better buying interest as they alter their pricing policies such that they are no longer offering retroactive discounts to customers given the recent increases seen in upstream costs. On Monday, a major domestic producer announced a price increase of CNY500/ton (US$74/ton) on their offers to East China, citing rising distribution market prices and improved buying interest as the reasons for their price increases. In Southeast Asia, buyers have also shown renewed interest in the market owing to higher energy prices and increasing prices in China’s domestic market. Converters in the region reported receiving import offers at prices stable to US$20/ton higher from the past week, with a few converters electing to make some purchases to cover their immediate needs. While converters have become more active in the market, they commented that they are still wary of purchasing large quantities as many of them suspect that the current rise in prices will ultimately prove to be temporary. Indonesian producers reported that they left their offers to the local market unchanged this week, preferring to observe market developments for a while longer before making their next move. However, several distributors in the country stated that they are no longer willing to give discounts from the producer price level, with one producer source commenting that they would not be surprised to see distributors offering above the producer price level in the current conditions.