Petrotahlil - Indian polypropylene (PP) producers are dangling price guarantees to buyers, in a bid to spur demand to prevent values falling even further on the back of weaker domestic demand.
Producers said that PP sale prices will be maintained between 19-31 August. An assessment of whether real prices have fallen or dropped during the price guarantee period will occur on 1 September. Should real prices fall, buyers will be remunerated in the form of credit with the respective producer. If real prices rise during the same period, buyers will not need to make any further payments for their purchases.
The measure is being implemented to try and bring stability to softening PP markets and to boost buyers' confidence levels. This move could also help to stimulate demand and ease inventory pressure among producers, as well as increasing prospects of continued offtake.
Current inventories at downstream converters and processors are high. Many buyers took advantage of the lower prices between April and May, which were at $710-$785/t cfr India, to stock up on PP raffia. Domestic buyers are only making purchases on a need-to basis, as they continue making good margins using leftover inventories from earlier purchases, hence the prevailing weakness in demand.
Indian producers have also tried other means to stimulate demand. Indian producers since the start of August have reduced PP raffia prices by 1,000 rupees/t ($13/t) for two consecutive weeks. They introduced discount schemes in July to entice buyers to purchase more quantities, with larger discounts being offered per tonne for higher volumes. These discounts will continue while the price guarantees are in place.
Import prices for PP raffia have held at $900-920/t cfr India since 23 July. Prices have been steadily rising since June, when processors began to operate at higher capacity following Covid-19 lockdowns. But prices have begun to stagnate in recent weeks because of weaker demand.
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Source : Argus