FocusMiddle East PE, PP markets poised to bottom in June

11 May 2009 04:52  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--Polyolefins markets in the Middle East were expected to bottom in June, when new supply would become available, easing the current tight market situation, suppliers and buyers said on Monday.

“The ongoing price rally is being supported entirely by supply constraints, and not by demand fundamentals,” said a trader.

Demand was stable-to-weak in most Middle East countries, with buyers buying just enough to cover their immediate needs, he said.

Prices of polyethylene (PE) and polypropylene (PP) in the Middle East had risen by more than 15% in the past month to hit $1,020-1,220/tonne (€745-891/tonne) CFR (cost and freight) last Friday, according to global chemical market intelligence service, ICIS pricing.

Supply has been restricted in the region due to diversion of cargoes towards Asia, where demand and prices were higher than in the Middle East, traders said.

“Allocations from regional suppliers have been reduced by 30-40% in May, forcing converters to reduce operating rates by up to 20%,” said a Jordan-based polymer converter.

Supply has been tight in recent weeks due to production hiccups, but was expected to ease in June with the start-up of several new PE and PP plants, a supplier said.

Demand has been stable in the Gulf Cooperation Council (GCC) region from the food packaging segment but lacklustre in the East Mediterranean (East Med) due to liquidity constraints caused by the global economic slowdown, a second converter said.

“The persistent rise in polymer prices has also spawned customer resistance in the Middle East, as converters’ margins are under increasing pressure,” said a third converter.

($1 = €0.73)

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By: Prema Viswanathan
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