28 December 2007 03:30 [Source: ICIS news]
By Prema Viswanathan
SINGAPORE (ICIS news)--Middle East and South Asia polyethylene (PE) and polypropylene (PP) makers are expected to see better margins in the first half of 2008 on tight supply and strong demand, but the outlook for the second half is less certain, suppliers, traders and end-users said on Friday.
Converters in the two regions will, however, continue to face a squeeze on margins as they struggle to pass on higher PE and PP costs to customers in the retail and other sectors.
“Supply is so tight and demand so robust that we don’t expect prices to come down until the second half of 2008, when supply is expected to ease a little as new capacities come on stream,” a supplier said.
Prices are expected to surge even higher in ?xml:namespace>
In the Middle East, demand for PE and PP is expected to grow by 7-8% in 2008, up from 6-7% in 2007, on strong growth from the packaging, gas and water pipes applications in for PE and from packaging, synthetic carpets and automotive parts segments for PP.
The substitution of polystyrene with PP in the food and beverage segment on environmental grounds will also give a boost to the popularity of PP in the
“The policy initiatives by local governments in the Middle East to encourage the growth of downstream industries, especially in
On the supply side, allocations from major suppliers will be limited if turnarounds and outages are as prolific as witnessed this year, said a trader.
Diversion of supply to high-priced markets such as Africa, Europe and
Reduced polymer output and rising prices in
Delay in the start-up of new capacities in the
The burgeoning demand and restricted supply will add to the pain suffered by end users, said a second end user.
While larger converters in the region tried to pass on the polymer costs through contract agreements with their customers and by increasing their exports to high-priced markets such as
“We may see more consolidation in the coming year in the plastics processing industry if this high price trend continues,” the end-user added.
The story is no different in South Asia, where demand for PE and PP in 2008 is expected to be 14-17% than in 2007 for
“Supply of PP will remain tight in the first half of the year, easing only in mid-2008, when Reliance Industries’ new Jamnagar PP plant comes on stream,” said the converter.
PE availability is expected to ease only in the second half of the year, when Haldia Petrochemicals’ deferred expansion goes through, said a second Indian converter.
In case of Pakistan, which is totally reliant on imports, the lack of local production could cause prices to keep surging in the first half of next year, as they have in recent months, said a Karachi-based trader.
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