Southeast Asia PP & PE Markets Stay Weak Despite Oil Price Recovery

The rebound in crude oil prices following renewed geopolitical tensions around the Strait of Hormuz has had little impact on Southeast Asia's polypropylene (PP) and polyethylene (PE) markets. Although concerns over Middle East supply resurfaced after fresh sanctions on Iranian oil exports and attacks on commercial vessels, regional polyolefin prices continued to weaken as oversupply and sluggish demand remained the dominant market drivers.

Some suppliers temporarily withdrew offers to reassess pricing after crude oil strengthened. However, most producers continued offering competitive prices as they focused on securing sales in an oversupplied market rather than protecting margins.

Supply-Demand Fundamentals Continue to Dominate

While Brent crude recovered above $78/bbl, market participants believe the recent increase has not been strong or sustained enough to change the overall outlook. Although Asian propylene prices posted their first weekly gain in nearly three months and ethylene values stabilized, abundant regional supply and weak downstream consumption have prevented higher feedstock costs from translating into stronger PP and PE prices.

Most buyers believe that unless oil prices continue rising sharply or shipping through the Strait of Hormuz faces major disruptions, current market fundamentals will continue to outweigh geopolitical concerns.

Buyers Continue Hand-to-Mouth Purchasing

Processors across countries such as Vietnam and Malaysia remained cautious, purchasing only immediate production requirements despite increasingly attractive import offers. Comfortable inventory levels, large price differences between various supply origins, and uncertainty regarding producers' stock positions have discouraged bulk buying.

Instead of rushing to secure material over concerns about potential supply disruptions, buyers have largely adopted a wait-and-watch approach while monitoring developments in both the energy market and regional supply conditions.

Heavy Competition Keeps Prices Under Pressure

Strong competition among suppliers continued to drive prices lower throughout the week. In the PP market, Middle Eastern suppliers introduced some of the largest reductions, lowering offers by as much as $100-150/ton while competing aggressively with Chinese and South Korean cargoes.

The PE market also remained under pressure. LDPE film recorded the sharpest weekly decline, falling by around $100/ton, while LLDPE film and HDPE film prices also moved lower due to ample availability from the Middle East, the US, China, and Northeast Asia.

Market participants noted that suppliers remain focused on maintaining market share, with oversupply continuing to limit pricing power.

Most Geopolitical Premium Has Already Disappeared

The muted market reaction also reflects the fact that much of the price premium created by earlier geopolitical tensions has already been removed. Compared with levels before the US-Iran conflict earlier this year, Homo PP Raffia remains around $150/ton higher, LDPE Film is approximately $125/ton above its earlier level, HDPE Film retains a premium of roughly $105/ton, while LLDPE Film is only about $60/ton above pre-conflict prices.

The sharp reduction in these premiums suggests that the market has already absorbed much of the earlier geopolitical impact, making buyers less likely to react aggressively unless physical supply disruptions become more severe.

Outlook

Market participants will continue monitoring crude oil prices and shipping activity through the Strait of Hormuz. However, unless geopolitical tensions significantly disrupt Middle Eastern exports or lead to a sustained increase in energy and freight costs, abundant supply and weak demand are expected to keep Southeast Asia's PP and PE markets under pressure in the near term.

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