Vietnam's domestic PP and PE markets strengthen as tight supply supports prices

Vietnam's domestic PP and PE markets have rebounded sharply, joining the broader regional rally as higher feedstock costs and limited local availability pushed prices higher during July. The recent uptrend has effectively ended a three-month decline, with significant price increases recorded in the week ending July 24 as tightening supply strengthened sellers' pricing power.

The latest recovery has lifted domestic polyolefin prices to around one-month highs, widening the premium created by recent geopolitical tensions. However, despite the sharp rebound, many market participants remain cautious about the medium-term outlook, as downstream demand continues to be weak while crude oil prices have recently retreated.

Limited supply adds momentum to price recovery

The rally has been driven by a combination of rising upstream costs and tightening domestic supply. Higher crude oil prices during most of July, along with stronger naphtha, ethylene and propylene values, increased production costs, while reduced local availability further supported price increases.

Market participants reported that shrinking inventories have become one of the main reasons behind the recent rally. According to traders, available domestic stocks have become increasingly limited, with fresh import cargoes not expected until August. This has encouraged sellers to maximize sales at higher price levels while supply remains tight.

Another trader noted that differences in inventory levels among suppliers have created wide price variations across the market. Although additional shipments are expected next month, buying activity during June and early July remained cautious because many buyers anticipated further price declines. Even so, the trader believes the current rally may not be sustainable and expects prices to face renewed pressure once fresh cargoes arrive during August or September.

Weak demand limits broader market recovery

Despite higher prices, downstream demand has shown little improvement. Some buyers have replenished stocks to secure limited material and protect against additional price increases, but most purchases continue to be based only on immediate production requirements rather than large-scale inventory building.

Converters continue to struggle with weak finished-product demand, making it difficult to absorb the latest increases in resin prices. Many buyers believe current price levels are too high, especially as existing inventories remain sufficient to support near-term production.

Several processors also admitted that the speed of last week's rally caught them by surprise, leaving them unable to purchase material before prices increased. Although inventories have fallen at some companies, many still prefer to buy only when necessary, viewing current market levels as too risky.

The market therefore remains primarily supported by supply shortages and higher feedstock costs rather than any meaningful recovery in downstream demand.

Market remains firm but upside may become limited

Entering the final week of July, Vietnam's domestic PP and PE markets have continued to maintain a firm tone as limited local availability keeps sellers in a stronger negotiating position. Additional increases of VND1-3 million/ton ($38-114/ton) have already been implemented for Homo PP Raffia, LLDPE Film and HDPE Film.

Traders reported that many domestic suppliers have already exhausted available inventories and are waiting for fresh shipments expected in August, allowing the current supply squeeze to persist.

However, further gains may become more difficult. Buyers have become increasingly resistant following last week's rapid price increases, with many considering current levels too high in view of weak downstream demand. At the same time, the external cost environment has started to soften. After briefly trading above $100/bbl last week, Brent crude has fallen below $90/bbl as easing tensions between the US and Iran have improved hopes for diplomatic progress and reduced immediate concerns over disruptions to shipping through the Strait of Hormuz.

As a result, while tight supply continues to support the market for now, future price direction will largely depend on the arrival of new cargoes and any improvement in downstream demand.

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