Middle East PE, PP prices surge on shortages

03 January 2008 08:57  [Source: ICIS news]

SINGAPORE (ICIS news)--Polyethylene (PE) and polypropylene (PP) prices for January shipment cargoes rose by up to 6% in the Middle East, causing converters to suffer a severe margins squeeze, industry players said on Thursday.

The price hikes was due to intensifying supply constraints, they said.

A spate of turnarounds and shortages, coupled with rising prices in China, left Middle East customers with little bargaining power, a Dubai-based converter said.

“Allocations from major producers for PP and PE have been slashed by 50% and 30% respectively this month due to lack of availability,” a Jordan-based trader said.

The sharpest rise was in the prices of low density PE (LDPE), which surged by $100/tonne ($68/tonne) from December levels, breaching the $1,800/tonne DEL (delivered) level for the first time ever in the East Mediterranean region.

Availability of LDPE had been extremely restricted, with no new capacities coming on stream in recent months and upcoming start-ups in Iran delayed time and again.

Demand for linear low density PE (LLDPE) had also been bullish, with prices rising by $80/tonne due to the delayed restart of the Sharq plant in Saudi Arabia and increased demand for LLDPE as a substitute for scarce LDPE.

High density PE (HDPE) film prices have also risen by $50/tonne in the Middle East due to shortages and strong demand from China.

PP prices in the region rose by up to $70/tonne, due mainly to declining availability caused by outages and turnarounds.

“Margins are under pressure, but we have no option but to stock up in January, as we bought only on a need-to basis in December due to the seasonal slowdown ahead of the year-end stocktaking,” said an Oman-based converter.

($1 = €0.68)

By: Prema Viswanathan
+65 6780 4359

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