Southeast Asia non-dutiable PP falls as supply lengthens

SINGAPORE (ICIS)–Spot prices of non-dutiable polypropylene (PP) cargoes in southeast Asia have been falling since mid-June as regional supply was boosted by capacity start-ups in Vietnam and Malaysia.

Downward price pressures may continue for non-dutiable cargoes in the near term, while sellers of dutiable material from the Middle East and India are not keen to adjust prices lower.

In the week ended 13 July, non-dutiable material stood at $1,290/tonne CFR (cost & freight) SE (southeast) Asia, down by $30/tonne from mid-June, according to ICIS data.

Dutiable PP flat yarn prices, on the other hand, dipped $10/tonne over the same period to average $1,265/tonne CFR SE Asia, the data showed.

The price gap between the two has narrowed to $25/tonne last week, after staying at $50-60/tonne for the most part of 2017, according to ICIS data.

Spot prices of non-dutiable cargoes came under pressure with fresh supply hitting the market, following the start-ups of Nghi Son Refinery and Petrochemical’s (NSRP) 400,000 tonne/year plant in Vietnam and the 200,000 tonne/year facility of Lotte Chemical Titan in Malaysia.

Deals for non-dutiable ASEAN-origin PP flat yarn grade cargoes were concluded at as low as $1,280/tonne CFR (cost & freight) Indonesia last week, for July shipments.

“Sales has been slow this month. We still have allocations left over from July that we have yet to clear,” a regional distributor said.

Some ASEAN-based PP suppliers had to reduce offers for July- and August-loading cargoes in the week, sacrificing profits to secure more sales volumes.

Import availabilities from South Korea would also lengthen in the third quarter, with S-Oil expected to complete building an olefin downstream complex at its Onsan refinery in Ulsan, which will include a 405,000 tonne/year PP capacity.

In contrast, a number of Middle East suppliers were not under pressure to sell, with offers largely maintained at around $1,270/tonne CFR SE Asia.

In addition, Indonesia’s demand for dutiable PP cargoes picked up in July following the government’s issuance of annual import duty exemptions, market sources said.

Market players were shrugging off the narrowing of the price gap between dutiable and non-dutiable PP in southeast Asia.

“We’re not overly worried …. While there might be an oversupply of ASEAN-origin materials in the short term, the market should adjust to the additional supply in the long term,” a southeast Asian producer said.

Focus article by Leanne Tan

Picture: Sacks of rice. Polypropylene (PP) flat yarn is used in making sacks. (Source: KeystoneUSA-ZUMA/REX/Shutterstock)