China’s polypropylene (PP) import may improve plastics processors

China’s polypropylene (PP) import demand may improve in October as plastics processors are expected to replenish their stocks by then, regional PP producers said on Monday.

The prices of injection and yarn grade PP have fallen by $40/tonne in the two weeks ended 25 July due lean demand and bearish sentiment triggered by a continuous fall in crude prices, according to global chemical market intelligence service ICIS pricing.
"Buying interest is expected to be weak for August and September shipments due to the current downtrend and the Beijing Olympics, which means importers will be holding low inventories in October," one of the producers said.
China’s buying interest had been weak because the recent price hikes to $2,000/tonne CFR (cost and freight) China and higher had cut deeply into plastics processors’ margins, with many of them reducing operating rates, a second producer said.

"The plastics processing sector is estimated to be running at below 50% capacity now," the second producer said.

Many Chinese importers were also holding back purchases in the belief that prices could fall further, regional traders said.

Some regional producers and traders said they believed China’s import prices could bottom at $1,800/tonne CFR China for injection and yarn grade PP.

However, other producers said they believed improved demand might not necessarily support prices, as much depends on the values of feedstock crude and propylene.

"If crude prices fall below $100/bbl, Asian propylene values are likely to go down to $1,500/tonne FOB [free on board] South Korea. When that happens PP would fall below $1,800/tonne CFR China," the second regional PP producer said.