Will China’s focus on PP exports cushion the global run-up?

Will China’s focus on PP exports cushion the global run-up?



Chinese PP offers have shown up recently in Vietnam, Turkey, and Europe, players reported. This is the consequence of Chinese producers’ willingness to take advantage of arbitrage opportunities emanating from sharper increases in these markets, although they are not necessarily at aggressive levels.

Exports out of China have gained momentum as demand from Chinese buyers has somewhat slowed down, but import offers have remained elevated since the uptrend in China lagged well behind the global spike in the heat of the exacerbated supply tightness. This has baffled global players about whether the emergence of these Chinese cargoes will stymie the rally in full swing.


Chinese cargoes cease further PP hikes in Turkey

Turkish PP consumers were shattered by uncontrolled price hikes starting from mid-February, which drifted the market into a state of chaos. Short import supplies amid logistic turmoil and production hiccups across the globe coupled with rapid increases in Europe and America fueled an unprecedented rally in the market.

Quotas from regular suppliers from the Middle East, Europe, and Iran shrank while a polar storm in the US exacerbated the panic mood among Turkish buyers further. PPH prices reached an all-time high both for raffia and fiber in March.

On the other hand, players had a chance to offset the absence of sufficient allocations from mainstream supply sources by the emergence of Asian cargos, mainly from China. Despite posting gradual increases during the run-up, Chinese offers mostly formed the low end of the overall import ranges and offered a more competitive edge compared to Middle Eastern origins amid their longer delivery terms.

 “We had to secure bulky tonnages of Chinese PPH in late February and early March to cope with tremendous hikes from other sellers. These cargos met buyers’ needs to some extent and put a cap on unstoppable increases,” commented a manufacturer.

Some buyers noted that players were not eager to engage in further Asian materials recently as their cargos secured at lower levels in January and early February will start to arrive soon. “We find distant Chinese PP cargos risky as Turkey’s import market already hit sky-high levels. Players are on the edge as overrated market levels may not be sustainable at some point,” a player opined.


Vietnam receives competitive Chinese PPH offers

A similar scene was observed in Southeast Asia, where a resistance mounted on the buyers’ side toward multi-year high PP prices earlier in March. The market retained its firming trend albeit at a slower pace, supported by tight Middle Eastern allocations.

In the meantime, higher netbacks attracted Chinese homo-PP prices to Vietnam this week, with prices standing below the low end of the overall import market. These offers were deemed quite attractive as they stood at least $100/ton below the mainstream Middle Eastern origins.

Vietnam is China’s nearest destination to divert excess supplies, which also offers healthier margins this time.


Arbitrage window is wide open to Europe; Chinese PP finds its way, too

Chinese PP offers were also heard across Europe as well as other Asian origins including Thailand, South Korea, and India. After PP prices have hit all-time highs in Europe upon March hikes, overseas suppliers have started to divert their cargoes to these destinations given the arbitrage opportunity that has arisen.

Nevertheless, buying interest for these Asian origins is not conspicuous given the expected arrival of these cargoes in May. Plus, their prices are standing at par with the low end of the local spot ranges and therefore, buyers remain vigilant to take the risk.


The uptrend in China’s import PP market remains intact

Meanwhile, import PP prices in China continued their uptrend with $30-40/ton hikes this week, boosted by strong energy fundamentals and ongoing global supply tightness. This was because higher propylene prices and low Middle Eastern volumes counterbalanced buyers’ resistance toward rapid hikes.

This is even though local stocks remain high inside China as the market has not been able to digest the high stocks accumulated during the holiday, and Dalian futures have fluctuated recently

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