SEA players: Import homo-PP at the split road

Import homo-PP to Southeast Asia has been steadily firming up since late January in the concern of tightening supply ahead of a series of maintenance shutdown. Besides, strong propylene costs have also provided some support to the current trend. However, the general sentiment seems loosing steam this week with a good number of re-export cargoes from China emerged in Southeast Asia, stemming concern over the near term outlook without the demand in Asia’s largest importer.

In fact, the lower end of the overall price range, which is formed mostly by the re-export cargoes, has softened by approximate $15/ton week on week basis. Meanwhile, the upper end of the overall prices range, which represent direct offers from regional and overseas suppliers, continue to firm up, regardless of the concerns buyers are having, due to lack of availability. Two scenarios are being actively discussed.

First, the continued emergence of re-export cargoes from China at competitive prices would further dampen buyers confident in Southeast Asia, creating pressure on direct cargoes. Together with the softening propylene costs, market might see small to medium scale of downward price adjustment in the near term.

Second, the number of re-export cargoes from China might slowly diminish, leaving market with a reality of supply tightness amid maintenance shutdown season. Demand is expected to pick up in March, in line with the preparation for harvest season and Ramadan celebration, which might again lift the general sentiment.

A Vietnamese buyer commented, “It very much depends on the state of demand in China. The first scenario might occur if Chinese buyers remain inactive in the coming weeks. At the moment, buyers here are feeling the risk of taking deep seas cargoes at higher prices while the in-flow of re-export cargoes is stronger day by day.”

An Indonesian trader added, “We are not seeing much buying interest in Indonesia despite the lack of material in local ground. Import offers from Southeast Asian suppliers are now higher than domestic prices; therefore it is very difficult for overseas sellers to achieve the full hike target in Indonesia. We think market is very near to the peak.”