FocusS Asia PE, PP to rise further on demand

19 November 2007 05:09  [Source: ICIS news]

PE and PP prices are on the way upBy Prema Viswanathan

SINGAPORE (ICIS news)--Rising South Asian polyethylene (PE) and polypropylene (PP) prices are expected to chalk up further gains in the coming weeks due to strong demand and limited availability, suppliers, traders and end users said on Monday.

Prices of PE and PP rose by up to $60/tonne and $25/tonne respectively in Pakistan and by up to $40/tonne and $15/tonne in India on Friday, from a week earlier, according to global market intelligence service ICIS pricing.

“The return of Chinese buyers to the market has caused sentiment to strengthen in India and Pakistan,” an Indian trader said.

Tight supply, caused by the diversion of cargoes from the Middle East and Asia to the bullish Chinese and European markets, also drove up prices.

The Pakistan polyolefins market saw the sharpest surge, with one Middle East supplier raising its high density PE (HDPE) and linear low density PE (LLDPE) offers by $100/tonne from November levels, taking buyers by surprise.

“Inventories among traders and end users are extremely low, so it is quite possible that the supplier can conclude business close to its offers,” a Karachi-based trader said.

Across the border in India, buying activity rebounded after slow trade the previous week due to the Diwali holidays.

December offers for HDPE and LLDPE from Middle East suppliers were expected to be hiked above $1,500/tonne CFR (cost and freight) level this week, traders said.

PE imports into India have been quite strong this year on the back of an estimated 19% surge in demand.

India’s third quarter 2007 PE imports were estimated to have almost doubled year on year on strong demand, with HDPE imports estimated at 27,000 tonnes and LLDPE imports at 22,000 tonnes.

PE imports, however, were seen to be on the decline in October, as Asian suppliers, who had flooded the Indian market in the third quarter, withdrew as customers resisted high offers on the back of high trader inventories.

PP prices were slower to rise in India and Pakistan than PE, the availability of which was more restricted.

However, strong demand was expected to keep prices from declining in the next few months, suppliers said.

PP prices last Friday were at $1,415-1470/tonne CFR India and $1,425-1,460/tonne CFR Pakistan across grades, up $15-30/tonne from a month earlier.

Stronger than expected growth in the packaging segment is expected to boost Indian PP demand by 13-14% in the financial year ending 31 March 2008, from 1.5m tonnes/year in 2006-07, suppliers and traders said.

“However, the availability of abundant PP cargoes next year, after the start-up of new Indian and Middle East capacities, could dampen sentiment from the second quarter of 2008 onwards,” an Indian end-user said.

The major PE and PP producers in India are Reliance Industries, Haldia Petrochemicals and Gail India.

Major exporters include SABIC, EQUATE and Borouge. Pakistan has no local production of PE and PP and imports cargoes from the Middle East and Asia, including India.

By: Prema Viswanathan
+65 6780 4359

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