Middle East producers deal with narrower PP premiums

Middle East producers are expressing concerns about narrowing premiums between polypropylene (PP) raffia and block co-polymer premiums in Asia.

PP co-polymer prices typically command a $50-80/t premium over raffia in Asia but this has narrowed significantly. Middle East producers have maintained export premiums of $30/t in recent weeks but have struggled to find willing buyers.

Mideast Gulf producers are regular sellers of PP co-polymer to southeast Asia and China.

Automotive and electrical appliance demand in China has been hit significantly because of the US-China trade war. Compounders are also operating at reduced rates in China.

The gap narrowed in late July, when PP raffia futures increased, leading to higher offers in the physical market. Co-polymer prices remained steady without a futures market.

Recent PP turnarounds in China have affected PP raffia supplies more than PP co-polymer. Co-polymer supplies remained long in August compared with raffia.

But the narrowing premium is expected to be only a temporary event. PP raffia supplies in September are likely to increase after the turnarounds end, while co-polymer demand will increase next month, signaling a possible return to previous premium levels.