Higher crude and propylene pressurize Asian PP markets

Spot PP markets in Asia are facing some upward pressure following the rally in spot propylene and crude oil costs seen last week. As per Chemorbis, though crude oil prices have slipped since last week, spot propylene prices are still rising due to export opportunities and plant shutdowns in Asia, prompting increased initial May offers from sellers for PP with increases vs April offer levels. In China, domestic producers announced price increases of CNY50-200/ton (US$7-29/ton) on the first trading day of the week, supported by improved buying interest as well as firm upstream costs. Suppliers are taking an increasingly firm stand on pricing due to higher feedstock costs, and buyers elect to purchase some materials towards the low end of the overall range on fears that stronger propylene costs could push sellers to ask for additional price increases over the near term. However, the current supply and demand dynamics may not allow sellers to push prices much beyond their present threshold. In the import market, traders are receiving an increasing number of price inquiries at the beginning of the week in line with stronger prices in the domestic market. Over the past week, import offers for homo-PP have gained $20/ton on the high end as rising upstream markets pushed sellers to attempt to raise their prices. Traders report that they are not planning to concede to any discounts on their offers due to the increasingly bullish sentiment in the Chinese market. Accordingly, spot PP prices in Southeast Asia have gained some ground. A Thai producer announced initial May offers for homo-PP injection and raffia with increases of US$30-40/ton from April offer levels. Few deals have been concluded at prices close to new offer levels in the Philippines. In Indonesia, an offer for Middle Eastern raffia from a global producer was US$30/ton higher than the producer’s most recent offer levels. The buyer does not plan to make any purchases for now as they are satisfied with inventory levels. Spot propylene offers on an FOB Korea basis gained US$40/ton over the course of the last week. Healthy import demand from Latin American customers has allowed a few major Asian producers to pare down their excess propylene inventories, while some new production issues in Japan have also lent support to higher prices. Japan’s Mitsui experienced an unplanned at two propylene plants with a combined capacity of 420,000 tpa over the weekend while another Mitsui facility with 150,000 tpa of propylene capacity was unable to restart as planned last week, delaying the scheduled restart date to the end of this week. While the short-term outlook for the Asian PP market is bullish, many buyers are not in any rush to conclude deals at the current price levels as they expect to see lower prices in May. The markets are expected to witness an oversupply effect in May, caused by the large new capacity additions over the past year.