FocusMid-East PE, PP to remain strong until Q2

03 December 2007 06:55  [Source: ICIS news]

By Prema Viswanathan

 

SINGAPORE (ICIS news)--Polyethylene (PE) and polypropylene (PP) markets were expected to remain bullish in the Middle East until the second quarter of 2008 on tight supply and improving market sentiment, following the 2.7% price surge last week, suppliers, traders and end-users said on Monday.

 

PP prices in the region rose by up to $40/tonne and PE by up to $30/tonne on Friday from a week ago, on the back of severe supply constraints and strengthening demand, they added.

 

The diversion of cargoes to China, where buying activity has rebounded following the recent government directive to reduce polymer output and increase production of refined oil products, also boosted prices.

 

Also limiting the availability of PE and PP was the diversion of Middle East cargoes to new markets such as Africa, which has seen a surge in demand for polymers.

 

Price hikes in the US and Europe and strengthening ethylene and propylene feedstock costs have also contributed to the heightened buying sentiment in Middle East polymer markets.

 

PE prices in the Gulf Cooperation Council (GCC) and East Mediterranean (East Med) regions rose to $1,430-1760/tonne CFR (cost and freight) across all grades on Friday from a week ago, while PP prices surged to $1,440-1,540/tonne CFR, according to global chemical market intelligence service ICIS pricing.

 

“Margins are under pressure, but we are able to absorb the price increases, as we don’t need to buy large volumes in December, due to the seasonal slowdown ahead of the year-end stocktaking,” said a Dubai-based polymer converter.

 

Supply was tight due to strong demand in China and impending turnarounds at Middle East plants in December and January, traders and end-users said.

 

“Our PE and PP allocations from regional suppliers has been cut by 30-40%, as they are more interested in catering to the requirements of big markets like China and Turkey,” said a Middle Eastern trader.

 

A second trader said: “There is a flood of enquiries from converters who are worried they may not get enough cargoes to meet their needs in January, but we are unable to fulfil their requirements.”

 

Supply was likely to be further restricted in the coming weeks, due to the ongoing two-week long maintenance shutdown at Sharq’s 750,000 tonne/year linear low density PE (LLDPE) plant at Al-Jubail, and the impending turnarounds by Kuwait’s Petrochemical Industries Co and Oman Polyropylene, traders and end-users said.

 

However, from the second quarter of 2008, sentiment in Middle East markets was likely to soften, as the impact of new PE and PP capacities would be felt, said suppliers and traders.

By: Prema Viswanathan
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