FocusMiddle East PE, PP prices fall 3.6%, downtrend may continue

31 May 2010 09:02  [Source: ICIS news]

By Prema Viswanathan

SINGAPORE (ICIS news)--June prices for polyethylene (PE) and polypropylene (PP) cargoes in the Middle East fell by as much as $50/tonne (€41/tonne), or 3.6%,  from May due to weak upstream values, and the downtrend may continue, industry sources said on Monday.

Prices for high density PE (HDPE) and for linear low density PE (LLDPE) eased by $30-50/tonne at $1,300-1,330/tonne CFR (cost and freight), while values of raffia and injection grade PP in the Gulf Cooperation Council (GCC) region dropped by $30/tonne to $1,300-1,330/tonne, ICIS pricing data showed.

PE and PP prices had been on a steady climb since December 2009 until last week’s decline.

“The past year has been a bonus for suppliers, who have been reaping good margins contrary to expectations. It is time prices began to stabilise, as buyers are finding it difficult to cope with the margins squeeze,” said a PE end-user in Oman.

“PP suppliers have been justifying their persistent price hikes in the past few months by citing high upstream costs. But with olefin feedstock prices falling sharply, they no longer have that excuse to keep prices high,” said a PP end-user in Dubai.

Ethylene plunged $90-120/tonne week on week to $980-1,050/tonne CFR NE (northeast) Asia, while propylene fell $120-140/tonne to $1,010-1,110/tonne CFR NE Asia last Friday, according to ICIS pricing.

The sharp swings in crude values and falling prices in the key China market further dampened buying sentiment in the Middle East, a source close to a GCC supplier said.

“Demand fundamentals are fairly stable in the Middle East, but buyer resistance is intensifying due to the bearish and volatile market trends,” he said.

PP was holding up slightly better than PE in the Middle East due to tight supply, traders said.

“Several new plants are facing technical issues and not operating at optimum rates, so there is a shortage,” said a GCC trader.

But once the plants achieve full output, PP would also come under pressure, he said.

HDPE film is more dense than LLDPE and is used mainly to make shopping bags and for food, drink and cosmetic packaging. LLDPE film, on the other hand, is used as a liner in shrink wrap, and for drip irrigation. PP is used in packaging and automotive applications.

($1 = €0.81)

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By: Prema Viswanathan
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