PE and PP prices do not track crude prices closely and the global crude oil price fluctuations in Q3/Q4 2016 barely impacted PE and PP prices. Crude oil prices largely affect market sentiment, hitting the buying/selling patterns and have indirect effect on supply-demand balance. And the PE/PP demand-supply balance is a stronger price driver, according to ICIS Chemicals Update.
In India, in the Q4 2016, the imports of PE and PP were heavily influenced by import parity of domestic product. The Q4 2016 prices were weighed down by ample domestic availability, price discounts for volume, and cash bookings. The Q4 2016 demand was hit by demonetisation move.
In India’s PP flat yarn prices saw limited upward movement in Nov/Dec 2016. The fall-out of the currency crunch and lower import parity was that the construction sector was hit. There was little impact of Reliance Jamnagar Q4 2016 turnaround.
Regrading the 2017 PE supply position, approx. 4.5m tonnes additional capacity from US shale gas projects are expected. Besides, potentially 1.8 m tonnes and 2 m tonnes from China and India respectively are expected. China continues to be the main target market in Asia, and Vietnam to follow.
Regarding PE/PP demand and supply, the ICC report sees improved Q1 2017 demand in India and the LLDPE, HDPE imports to be moderate. Indian domestic PE, PP supply is set to increase. Some commercial operations are expected by mid-2017 and the imports to come off in H2 2017.