Will softness in China pull down domestic PP, PE prices in Vietnam?

After lagging behind levels in China during the significant run-up in local PP and PE prices between May and December 2013, domestic PP and PE prices in Vietnam set new multi-year highs towards the end of January, as per ChemOrbis. However, local prices are now coming under pressure as China loses momentum and some sellers have already started to step back in Vietnam’s local market. According to data from ChemOrbis Price Index, domestic PP prices on an EXW China basis began trading at a premium with locally-held prices on an FD Vietnam basis towards the end of July 2013. At the height of the up-trend in the Chinese market in early December, the premium for local PP in China over Vietnam had climbed above US$160/ton. Since then, however, Chinese prices have been losing ground while prices in Vietnam have remained steady to firm, resulting in Vietnam’s local market regaining premium over China towards the end of January. Vietnam’s local market currently trades at a premium of around US$75/ton to China. A Vietnamese distributor said that they reduced their prices for domestic homo-PP by US$15/ton this week. “We are not receiving many inquiries from China and have decided to retain our cargoes in the local market as we believe we can obtain better prices here,” the distributor stated. A Vietnamese converter commented, “We find the offers we received for domestic material to be quite high, which we attribute to the fact that availability is limited after local suppliers exported large volumes of material to China over the past few months. We plan to wait a while longer before purchasing as we believe that the weaker market in China will push down prices in Vietnam.” In the LDPE market, Vietnam currently trades at a premium of US$100-110/ton over China after the Chinese market had carried a premium of almost US$230/ton as recently as mid-December. A Vietnamese distributor said, “We had been holding stock levels as we had expected to see some downward price movements after the holidays. Local availability is limited, but this is counterbalanced by sluggish demand.” Another distributor reported reducing their locally-held PE prices by US$20-25/ton to Vietnam. “Buyers are mostly sticking to the sidelines anticipating lower prices and trading activity is weak,” the distributor commented. According to ChemOrbis, in the LLDPE market, China’s local market had also carried a premium over Vietnam from late July to early January, with the premium peaking in mid-December at US$110-115/ton. Vietnam, however, has regained premium since the start of February and now trades nearly US$90/ton above China. A trader based in Vietnam said that they received re-export offers for Middle Eastern LLDPE from China this week at prices below the offers given by their normal overseas suppliers. “We lowered our locally-held LLDPE prices by US$14-19/ton to speed up our sales, although most buyers are continuing to stick to the sidelines for now,” the trader stated.