Southeast Asian Import PP Surges to Five-Year Highs, Outpacing PE

Southeast Asia’s import markets for PP and PE have continued their upward movement since mid-July, supported by high energy and feedstock costs as well as supply uncertainties. However, PP has recorded a considerably stronger rally, increasingly outperforming PE amid tighter availability and mounting production cost pressures.

The gap between the two markets has widened in recent weeks. PP prices have surpassed their April peaks and reached multi-year highs, whereas PE prices remain below the levels recorded during the sharp rally earlier this year. The contrasting trends reflect differences in upstream feedstock markets, supply conditions and sellers’ pricing strategies.

PP Reclaims April Peaks While PE Remains Below Previous Highs

Southeast Asian import prices for homo-PP raffia, injection and PPBC injection reached their highest levels since March 2021 in the week ending November 6. The latest increases took prices beyond the peaks established during the rally following the outbreak of the US-Iran war earlier this year.

PP has made a substantial recovery from the correction that followed its April surge, with prices continuing to advance into early November.

PE grades have also gained ground since mid-July, but their recovery has been more limited. Import prices for all three major PE film grades remain below their earlier war-related peaks.

Compared with the highs reached in Week 15 of early April, HDPE and LLDPE film prices were still approximately 7-8% lower. LDPE film remained around 9% below its mid-April peak in Week 16.

PP’s Price Gap With LDPE Narrows, While Premiums Over HDPE and LLDPE Grow

The stronger PP rally has reshaped the price relationship between PP and PE grades in Southeast Asia.

Homo-PP raffia and injection continued to trade below LDPE film, but the discount narrowed to $85/ton in early November. This was the smallest gap since late January 2024, approximately half the difference seen in September-October and significantly below the $373/ton discount recorded during the April rally.

Meanwhile, HDPE and LLDPE film have increasingly traded at discounts to homo-PP. HDPE film remained below homo-PP for three consecutive weeks, with the discount widening to $83/ton in early November, its largest since October 2021.

LLDPE film has traded below homo-PP since late April. Its discount reached $93/ton in early November, the widest since July 2021.

Propylene Costs Rise Faster Than Ethylene, Supporting PP Prices

Differences in upstream feedstock trends have been a major factor behind the contrasting performances of PP and PE.

Spot ethylene prices on CFR China and CFR Southeast Asia bases climbed to around six-month highs. Propylene prices, however, posted stronger gains. CFR Southeast Asian propylene prices moved above six-month highs, while CFR China values reached unprecedented levels.

The propylene rally accelerated in October amid tight regional supply and aggressive short-covering. This pushed the propylene premium over ethylene to historically high levels.

On a CFR China basis, the propylene-ethylene spread reached $195/ton in October, its widest since April 2020. In Southeast Asia, the spread climbed to a record $200/ton. Although the gaps later narrowed, they remained substantial at approximately $180/ton in early November.

The widening spread highlighted increasing cost pressure on producers relying on merchant propylene and worsening economics for propylene-based production.

With feedstock expenses rising and margins under pressure, PP producers faced greater incentives to increase selling prices or restrict output. This provided PP with stronger cost support than PE and contributed to the growing divergence between the two markets despite buyer resistance.

### Chinese PP Offers Rise Sharply as PE Pricing Remains More Moderate

Chinese suppliers have been particularly aggressive in raising PP offers across Southeast Asia, driven by higher production costs and tighter domestic availability.

Elevated crude oil and propylene prices, along with earlier gains in Dalian PP futures, placed additional pressure on producer margins. Production reductions and maintenance shutdowns further restricted availability, with around 24% of China’s PP capacity reportedly offline in late October.

As replacement costs increased, Chinese sellers increasingly focused on protecting margins rather than export volumes. Their successive price hikes reinforced the firm trend across Southeast Asia, prompting other PP suppliers to maintain or raise offers amid limited supply and high replacement costs.

PE suppliers generally followed a more restrained pricing strategy. Middle Eastern producers continued to face logistical uncertainty and disruptions to regional supply flows. However, alternative shipping arrangements, including routes through Oman, allowed some suppliers to continue deliveries to Southeast Asian markets.

Irregular shipments and elevated freight expenses supported PE offers, although increases were less pronounced than those seen in PP.

US suppliers also maintained a relative cost advantage, particularly in ethane-based PE production. This enabled them to offer cargoes more competitively and provided Southeast Asian buyers with alternatives to higher-priced material from other origins, limiting the pace of PE price increases.

Differences in feedstock economics, supply availability and export strategies have therefore contributed to the widening gap between PP and PE.

### Weak Demand and Crude Oil Decline Add to Market Uncertainty

Despite PP’s stronger performance, demand across both markets has remained subdued. Buyers have largely restricted purchases to immediate requirements, avoiding inventory accumulation amid high prices and uncertainty over the rally’s sustainability.

Elevated resin costs have squeezed converter margins, while weak downstream demand has limited their ability to pass higher raw material expenses on to customers.

The latest sharp decline in crude oil prices has added further uncertainty. Following the steep sell-off in energy markets in early November, buyers have become more cautious about committing to purchases at prevailing polymer prices, expecting lower energy costs could eventually ease pricing pressure on suppliers.

While PP continues to outperform PE on the back of tighter supply and stronger feedstock cost pressures, weak demand and the recent oil price retreat have raised questions over how long the upward momentum can be sustained.

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