Market sources in China revealed to SSESSMENTS.COM that China's import polypropylene (PP) prices continued on an upward trend, with the prices reaching four-digit level this week on the back of higher propylene price, firmer international prices, and tight supply concern. Upstream, Asian propylene prices further stepped up amid a supportive demand in the region. Week over week, propylene prices on CFR China basis increased by $4-6/ton, while offers on FOB Korea basis are between $14-16/ton higher captured between $818-824/ton and $778-784/ton, respectively, on July 16 settlement.
According to the sources, most foreign suppliers maintained a stable offer level for PP Homo Raffia cargoes to the China market in the previous week as there were no strong fundamentals to support any form of price hikes. Some sources mentioned that import offers for PP Homo Raffia below $900/ton-level are no longer available in the market, mostly available at $910/ton and above. Following the stronger Chinese Yuan against the US Dollar, some buyers were showing better acceptance towards the import offers. As per China Foreign Exchange Trade System reports, Chinese Yuan strengthened against the greenback as foreign funds flock to yuan-denominated assets betting on the country's economic revival, gaining 600 pips to below seven against the US Dollar since July 6, 2020. However, the majority of buyers regarded the offer level above $900/ton-level as high and reluctant to restock at such offer levels. Although most suppliers were willing to entertain requests for discounts, buyers remain uninterested. Skyrocketing prices of import PP cargoes were discouraging converters from making fresh purchases amid slow demand for end-products, SSESSMENTS.COM was informed.
Import PP prices continue its firm trend this week, riding on strong gains in the energy market. This week, most suppliers are still targeting higher prices for PP Homo Raffia grades above $900/ton-level, with a range of increase between $5-40/ton on a weekly basis. China’s import PP prices are mostly available at around $900-1,020/ton this week. In response to sharp gains in import prices, most buyers in China are not actively seeking import cargoes, deeming current offers from suppliers too high to be workable, mainly due to a large drop in demand for end-products in domestic and export destination countries. Despite strong resistance from buyers, some foreign producers attempted to raise import offers to above $1,000/ton-level, mainly bolstered by strong gains in crude oil prices. On July 15, SSESSMENTS.COM was informed that one of the Saudi producers announced August shipment offers to China. As compared to July shipment, latest offers for PP Homo Raffia are available in the market at $10/ton higher, captured at $1,020/ton. Similarly, some buyers reported receiving August shipment offers for South Korean PP Homo Raffia cargoes via a trader at $1,000/ton. However, buyers were reluctant to take the cargoes and voiced out buy ideas at $50/ton lower than the initial offer level. Coming to the last trading day of the third week of July, the leading Malaysian polyolefins producer is also offering import PP Homo Raffia cargoes for August shipment to China at $1,010/ton. All import offers are on LC at sight, CIF China Main Port basis.
For the outlook, market sources in China voiced out to SSESSMENTS.COM that most producers could lose upward momentum in the second half of the year as the downstream market remaining resistant towards high PP prices, coupled with space for price hedging is shrinking. Besides, a possible bump in domestic supply could have a dampening effect on the rally, taking into account the new capacities that are slated to come on-stream in Q3 2020. As such, most suppliers are expected to be involved in rounds and rounds of price cuts to clear their stocks.
