Asian plastics market continues its bull run

The February contracts for High Density Polyethylene (HDPE) and Low-Density Polyethylene (LDPE) had been revised upwards by INR 1000 while those of Linear Low-Density Polyethylene (LLDPE) and Polypropylene (PP) had been revised upward by INR 2000 and INR 3000, respectively. With the West Texas Intermediate crude oil market breaching the USD 90 mark in the first week of February, the prices of the entire downstream value chain are expected to be impacted in the coming weeks.

Prices of feedstock Ethylene too had shot up in the first week of February by around INR 7000 while those of Polymer Grade Propylene (PGP) had risen by around INR 4000 during the same period. Further upward revision of contracts is expected from major manufacturers as the current spike in prices is because of a supply side tightness rather than any significant increase in demand.

China too had seen a sharp spike in spot prices of PE and PP in the second week of February after witnessing a slight demand slump at the onset of the lunar new year holidays in the first week. Spot prices of HDPE, LDPE and LLDPE all shot up by over 1.2% in the second week of February. PP, however, remains unaffected for the time being, but is expected to improve in the coming days.

Input costs for refineries are expected to remain at higher levels compared to last year and the margins for manufacturers down the value chain are expected to bottom out only in the closing weeks of March of the current quarter and thus price stabilization could be a far-fetched idea for the month of February as far as Polymer and Petrochemical industries are concerned. The volatility in the current geopolitical scenario also raises speculation over possibility of increased energy costs in Europe thus disrupting the vital equilibrium in the global supply chains.