Polypropylene Markets Diverge: Southeast Asia Faces Oversupply, East Asia Battles Supply Tightness

Towards the middle of December 2024, a divergence was noted in the Southeast Asian and East Asian Polypropylene (PP) markets, including a major event that could lead to China’s PP market losing its competitiveness in the global PP market. The market situation of Polypropylene diverged across Southeast Asia and East Asia, with prices witnessing a bearish market in the former and a bullish market in the latter. As China’s PP production capacity continued to expand, the Southeast Asian market consequently faced an oversupply, accompanied by global price competition. Market insights revealed that from January to October, China’s PP export volume reached 2.0232 million tons, with the annual export volume expected to reach 2.3–2.5 million tons, which continued to suppress prices in the global PP market.

However, a major shift is anticipated as the Indonesian Anti-Dumping Committee (KADI) has initiated an anti-dumping investigation on imported Polypropylene Homopolymer products included in tariff postal number 3902.10.40 (BTKI 2022) imported from Saudi Arabia, the Philippines, South Korea, Malaysia, China, Singapore, Thailand, and Vietnam. Among homo-PP exports from China to Indonesia, the proportion flowing to Indonesia has increased in recent years.

In 2023, the export volume was about 91.4kt, accounting for about 7.95%, while from January to October 2024, the export volume reached about 158.5kt, accounting for about 8.71%. It is still unknown whether the anti-dumping measure will be established, and what countermeasures may follow if it is.

Across East Asia, however, supply tightness continued as market insights revealed that most Propane Dehydrogenation (PDH) facilities in East Asia were operating at a loss. By October 2024, the average PDH operating rate was 68.12%, down 10 percentage points from the previous month, which contributed to limited PP production in East Asia, further threatening PP supplies to Southeast Asia.

Furthermore, one of the leading PP producers in the prime exporting South Korean market, Lotte Chemical, was reported to have been operating its PP production facility in Yeosu, South Korea, with a capacity of 1.23 million MT at curtailed levels since the end of November 2024 for unknown reasons, which is expected to further limit supplies of PP to prime Southeast Asian markets such as Indonesia and Malaysia amidst seasonal typhoons and rains, further expected to cause bottlenecks in circulation across the Southeast Asian market.

Despite uncertain supply conditions, demand for PP remained sluggish across the entire Asian region, with market participants noting that major industries such as automotive and construction continued to perform poorly, contributing to downward pressure on the entire PP market. Currently, PP prices rose by approximately 1% across South Korea and Japan and by 0.6% across China due to supply tightness, but prices depreciated by approximately 1% across Southeast Asian markets, namely Malaysia, Indonesia, Singapore, and Thailand, as weak demand conditions persisted.

Market participants across Southeast Asia further reported that suppliers primarily focused on liquidating existing inventories as the year drew to a close and stayed away from bidding in the spot market, as anticipation of recovery in demand from the primary downstream industries such as automotive and construction remained slim.

In plant news, a major Thai producer, IRPC, was reported to have completed maintenance and commenced production its four PP production units at Map Tha Phut, which may have eased supply conditions across the Southeast Asian region, thus keeping the Southeast market oversupplied.

As per expectations, the PP market across Southeast Asia and East Asia is expected to continue to diverge, with destocking activities prevailing across the Southeast Asian region, while persistent supply tightness in the East Asian market due to lower PDH operating rates may lead to an increase in prices.