PP market scrambles as Chinese PP prices spike following US-China tariff relief

Polypropylene market participants across the Americas are digesting the recent tariff relief between US and China, though the optimism was quickly shadowed by the sharp spike in offer levels from Chinese PP producers.

"PP prices domestically in China are supported and have increased. Every day it's been increasing $10-$15 further," said one trader, noting the uptick in offer levels.

Platts, part of S&P Global Commodity Insights, assessed the CFR Far East Asia raffia grade up $10/mt this week, settling at $870/mt, on May 16.

The surge in pricing for Chinese PP offers is largely driven by stronger domestic demand, according to market participants, as manufacturers ramp up production of finished goods destined for export back to the US. This recovery follows a long period of reduced trade activity after tariffs were first announced.

"Domestic demand for PP in China has increased, and producers are increasing offers, changing 1-3 times a day," a distributor said.

The recent increase in Asian PP prices might also mean a trend reversal across US and Latin American markets. Since President Trump's reciprocal tariff announcement on April 2, buying appetite for PP had further dwindled, exacerbating existing weak demand. In response, spot pricing for homopolymer PP softened steadily across the Americas.

Sources across the region are already seeing market participants take actions that should push PP prices upward in the immediate future.

In West Coast South America, a trader source said Asian producers withdrew their offers following the US Trade Representative's May 12 announcement and returned with higher prices. In Brazil, sources are also expecting higher PP levels.

"The reaction to the temporary agreement between China and the US is already determining price increases in the market, reverting the tendency seen in previous weeks," a Brazilian trader said.

US polypropylene pricing is also expected to increase as propane trade flows to China resume.

China relies heavily on US propane to feed its propane dehydrogenation units, which in turn is used for polypropylene production. American material accounts for approximately 58% of total propane imports.

While China's PDH run rates had been trending lower, expectations of a recovery are building as US propane exports to China rebound, in turn spiking up pricing for US polymer-grade propylene and polypropylene.

PP prices could also go up as freight costs across the region begin to tick up. A PP producer with dealings in Mercosur said at the beginning of May that freight costs from Asia to Latin America were very low, opening the window for foreign material to undercut regional players more aggressively.

However, as the US and China have paused retaliatory tariffs, several participants across all sectors are rushing to produce and ship as much goods as possible during the 90-day window. This in turn has created an acute demand for freight, which is already affecting PP operations in the Americas.

Some sources in WCSA said that they were observing increments between $10-$30/mt for each freight; with a trader in the region adding that "freight costs for exports will increase significantly because commerce is expected to be reactivated, and space on ships will be very tight". A source in Brazil and a distributor in the US both agreed that more imports from Asia should mean increased transportation costs.

Platts assessed container rates from North Asia to East and West Coast South America up $300/FEU and $100/FEU, respectively, from May 12 to May 15, both closing at $1,500/FEU for the latest assessment.