Surplus Mid East PP supply to hit regional prices

27 March 2008 15:05  [Source: ICIS news]

SINGAPORE (ICIS news)--The slew of new polypropylene (PP) capacities starting up in the Middle East in the next two years will lead to increased price volatility for PP in the region, a senior official of Saudi Arabia’s Tasnee (National Industrialisation Co) said on Thursday.

 

“With PP supply in the Gulf Cooperation Council (GCC) region growing from 2m tonnes/year to 7m tonnes/year by 2010, suppliers will be forced to become increasingly flexible in their marketing strategy and offer more discounts to customers,” said Walid al-Hammad, general manager of Tasnee, at the 2nd International Polyolefin Forum here.

 

The flexibility could involve widening the credit terms to 120-180 days from the current 90 days, he added.

 

"The surplus capacity will intensify competition among Middle East suppliers," al-Hammad said.

 

However, a positive fallout of the increased production would be the possible relocation of downstream industries from Europe and the US to locations in the GCC region to take advantage of the low cost feedstock availability, he said.

 

"The huge infrastructure development in the GCC in the next five years will increase business opportunity for converters, especially in Dubai, Abu Dhabi, Riyadh and Jeddah," said al-Hammad.

 

The new capacities emerging in the GCC region would cater not merely to GCC customers but also to the growing demand in the rest of the Middle East, Africa, the Indian sub-continent, the Asia-Pacific region and Europe, he said.

Saudi Polyolefins Co, a joint venture between Tasnee and Basell, which operates a 450,000 tonne/year PP plant at Al-Jubail, in Saudi Arabia, is set to start up a new 250,000 tonne/year plant by the end of this year.

 

The two-day conference, organised by ICIS partner CBI China, ends on Friday.

By: Prema Viswanathan
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