FocusME PP prices fall behind China by $100/t

06 June 2008 06:05  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Polypropylene (PP) prices in the Middle East lagged Chinese import prices by more than $100/tonne in a trend reversal, suppliers, traders and end users said late on Thursday.

Middle East PP prices have typically been $50-100/tonne higher than prices in China. But lately, this trend had been reversed.

Discussions for PP raffia and injection grades were hovering around $1,700-1,720/tonne CFR (cost and freight) Middle East this week. This compared with workable discussion levels on Friday afternoon at $1,820-1,830/tonne CFR China.

The main reason for the trend reversal was the more robust demand in China compared with east Mediterranean (East Med) and Gulf Cooperation Council (GCC) regions, said suppliers and end users.

"Suppliers realise that it will be more difficult to achieve huge price increases in the Middle East than in China, as they cannot use high crude prices as a justification," said a GCC processor. "Feedstock costs are much lower in this region, as the PP plants are not naphtha-based as in Asia."

A Middle East supplier said that it did not want to alienate its customers in the region by raising offers too sharply.

"There will be more than 3m tonnes/year of capacity coming on stream in the Middle East in the next few months, and many more players competing in this market. So it is important to maintain a good relationship with existing customers in the region," the supplier added.

In the past, end users in the Middle East have complained of poor treatment from their own regional suppliers, and had been forced to suffer cuts in allocations while cargoes headed to more lucrative markets such as Europe and Africa.

However, in the past month, such complaints have been less audible, especially from the larger converters. "I received my full PP requirement from my supplier, but I know some smaller converters who have had to make do with a couple of containers," said a second GCC converter.

But this situation is set to change next month, as supply constraints would exert upward pressure on prices in the Middle East, said suppliers and buyers.

Availability was extremely limited this week, with Ibn Zahr shutting down one of its two lines in Saudi Arabia due to technical problems.

The delay in the restart of Oman Polypropylene’s plant at Sohar also added to the tightness.

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By: Prema Viswanathan
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