Import homo-PP yarn hit multi-months high, but is it rising too quickly?

Import homo-PP offers to Vietnam witnesses an impressive rebound following a steep slide during late December 2018 with most of the gains are recorded after the Lunar New Year. 

Compared to the beginning of March, offers have jumped more than $65/ton on an average and it appears that market might persist on the current firming trend in the coming weeks due to limited supply condition. 

At the time this report is published, import offers for homo-PP yarn to the country are ranging $1180-1215/ton CIF Vietnam, LC AS term. Dutiable materials, including from the Middle East and India are at $1180-1215/ton while non-dutiable cargoes are at $1190-1210/ton. There is technically a very small gap between the two origins. 

It is important to note that the recent hike is mainly driven by the supply tightness and less on the demand side. In fact, many overseas suppliers prefer to divert cargoes to other markets, including India, Turkey and Europe for better profit margins. 

Meanwhile, the production issues at Nghi Son Refinery and Petrochemical that forced the company to shut down 30 days in March tightened availability further. 

This week, the number of deals for non-dutiable cargoes is rather satisfactory at the above-mentioned range, yet buyers are portraying a rather reluctance stance towards the dutiable cargoes despite the awareness that market might extend the current firming trend.

“We expect offers for the dutiable cargoes to reach $1230-1240/ton soon. However, end product demand is not very strong, especially with the school holiday and the raining season starting June. At the current pace, the market might only see changes in July, when more new plants come online,” a buyer commented. 

Other customers are slowing down a little as prices in Vietnam are rising quicker than other markets in the region. Traditionally, Indonesia market always commands a premium in prices over Vietnam, but it is the other way now. The location gap between Vietnam and China is also widening and players expected to see re-export cargoes from China would this trend persist in the coming weeks. 

“We are adopting a more cautious stance since prices have increased too sharply. The price risk is accumulating higher how,” a South Korean producer sold yarn cargoes to Vietnam at $1200/ton said.

It is also expected that Middle Eastern producers might gradually channel more quantity to Asia market in the coming month as the location gap with Turkey is now narrowing. Players also added that Muslim markets usually consume less homo-PP during the fasting month, which would translate into the possibility of better allocation to Asia market.