Asian PP: CFR FE Asia up $75/mt on week amid firm fiber grade demand
⚫Stricter measures to control PP prices in China
⚫Bearish demand in Southeast and South Asia
The Asian polypropylene market was firm but volatile this week, especially in China, amid reduced raffia supply and stronger fiber-grade demand for making masks.
Surging demand for PP fiber grade for mask and protective gowns has driven around 30% of Chinese PP capacities to switch to fiber grade since mid-last week, up from only 5% in March or an average of 10% in 2019, according to sources. This has led to tighter supply for the benchmark PP raffia grade.
In addition, there are active short-covering trading activities as a major settlement for the May futures contract is round the corner, lending further support to PP raffia grades.
This pushed Chinese PP up 35% on week to Yuan 8,600/mt ex-works for raffia grade Monday, before tumbling a total of Yuan 900/ mt to Yuan 7,700/mt ex-works Wednesday for prompt cargoes after the government announced strict quality and prices controls on medical supplies Monday evening.
Similarly, the PP CFR Fareast Asia marker was up $215/mt week on week to hit recent high of $895/mt Monday for raffia, and assessed down $80/mt since then to $815/mt Wednesday.
China’s Jiangsu province announced subsequently to investigate and control the recent volatile prices of raw material used for masks and protective gowns like spun-bond non-woven fiber fabric, which is mainly PP fiber grade.
This pressured the China domestic PP fiber grade, which tumbled from nearly Yuan 30,000 mt/year ex-works on Monday to less than Yuan 20,000/mt ex-works Tuesday and Wednesday, though still much higher than other PP grades, according to sources.
Nevertheless, Chinese trade participants remain concerned about overall PP demand amid the coronavirus outbreak and general bearish sentiment.
Southeast Asian PP buyers were reluctant to accept rising prices driven up by China, citing poor market fundamentals and demand in Southeast Asia.
“Customers are still not convinced about the sudden jump in price.
There is no demand in SE Asia” a source said.
“Everyone felt that crude oil price will increase after OPEC + consent to decrease the production. However, more than that, demand of it is not good so that all the related commodity is dropping again.
Actual demand [in Southeast Asia] is really bad,” a trader based at Southeast Asia said.
On the other hand, sellers were standing firms on offer to Southeast Asia and India due to more attractive price in China, resulting in wide bid/offer gap.
Physical spot deals were heard concluded between $750-$795/mt CFR Southeast Asia for raffia grade from last Friday until early this week.
Vietnam domestic PP was heard traded at around $720-$730/mt CFR Vietnam import parity value.
Indian demand remains challenging amid extended lockdown.
Hence, the few Indian PP producers partially maintaining operation were under pressure to export cargoes to manage stocks.
Platts Asian PP Weekly Rationale
Asian raffia-grade polypropylene was assessed down $60/mt day on day, or up $75/mt week on week at $815/mt, above a buying indication heard at $800/mt, following adjacent weaker marker.
A deal was heard concluded at $850/mt earlier morning, but deemed not representable by market participants in the afternoon amid falling prices.
Asian injection-grade polypropylene was assessed down $60/mt day on day, or up $75/mt week on week, at $815/mt, following raffia marker.
East China domestic prompt price was assessed down Yuan 550/mt on day at Yuan 7,700/mt ex-works, reflecting tradable discussions heard at Yuan 7,600 - 7,800/mt. Deals were concluded at Yuan 8,000/mt in the morning, but deemed not representable by market participants in the afternoon amid falling prices.
Isotactic PP was assessed up $75/mt on week at $835/mt CFR FE Asia, considering a typical price differential of $10-$20/mt to the base raffia grade.
Biaxially oriented PP was assessed up $75/mt week on week at $840/mt CFR FE Asia, following adjacent marker.
Block copolymer was assessed up $75/mt week on week at $860/mt CFR FE Asia, following adjacent marker.
In Southeast Asia, PP raffia was assessed up $30/mt week on week at $770/mt, reflecting the latest indicative discussions heard at $740-$795/mt, below a selling indication of $830/mt.
Deals were heard concluded between $750-$795/mt, but excluded from assessment, as these were the deals heard earlier this week.
In South Asia, raffia was assessed up $15/mt at $815/mt CFR South Asia, reflecting tradable discussions heard at $810-$830/mt, below offer of $910-$920/mt.