29 December 2008 06:30 [Source: ICIS news]
By Prema Viswanathan
SINGAPORE (ICIS news)--Middle East and South Asia polyethylene (PE) and polypropylene (PP) markets are likely to see considerable volatility in 2009, as the unfolding global economic downturn coupled with surplus supply exerts downward pressure on prices, suppliers and buyers said.
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On the supply side, prices in the Middle East and South Asia are likely to face downward pressure from the 10m tonnes of additional polyolefins capacity that will come on stream in 2009, most of it from the
“It is likely that most Middle East producers will run their plants at 100% capacity, forcing their counterparts in other regions to reduce production at their less cost-efficient plants,” said a
The outlook on the demand front is equally bleak, market players said. “Demand is set to take a further hit next year, as economies in the two regions begin to feel more strongly the impact of the global financial crisis,” said a second Middle East producer.
Demand growth projections for PE and PP in 2009 varied in the
“Middle East will be less affected by the global downturn than other regions, largely because its oil-rich economies have greater resilience to face up to the ongoing financial crisis, having accumulated considerable cash reserves in the past two years,” said a Dubai-based trader.
However, the 70% plunge in crude values from the $147/bbl (€104.37/bbl) levels hit in mid-2008 as well as the stock market losses suffered by converters is causing concern about the sustainability of Middle East polyolefins demand growth, said a second Dubai-based trader.
PE demand growth from the packaging, gas and water pipes applications is expected to take a hit in the coming year together with PP applications from the synthetic carpets and automotive parts segments, said an Oman-based polymer converter.
“We have suffered a severe squeeze in margins in the first half of 2008, causing demand growth to slow in the second half of the year. And although prices of PE and PP have softened considerably in the past few months, we are facing pressure from our own end users to pass on the decrease to them,” he said.
Major PE and PP producers in the Middle East and South Asia include Saudi Basic Industries Corp (SABIC), Saudi Polyolefins Co,
($1 = €0.71)
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