FocusMiddle East PP likely to stay firm in May on tight supply

15 April 2011 07:00  [Source: ICIS news]

PP raffia grade is a key raw material in packaging of grains.By Ong Sheau Ling

SINGAPORE (ICIS)--Polypropylene (PP) prices in the Middle East will likely remain firm and even increase in May, buoyed by short availability of the material, with two major suppliers due to shut plants for turnarounds, industry sources said on Friday.

Regional converters are hurting from the strong prices, but PP producers had to either rollover values or adjust them higher to keep a decent spread from feedstock propylene, even when demand is not strong, they said. (Please see graph below)

PP raffia grade, which is used in packaging of grains, was discussed at $1,700-1,740/tonne (€1,173-1,201/tonne) CFR (cost and freight) GCC (Gulf Cooperation Council) and $1,720-1,740/tonne CFR East Mediterranean (East Med) on Friday, market sources said.

Propylene was at $1,550-1,580/tonne CFR NE Asia at midday, while US crude futures were hovering at $108/bbl.

“We have to monitor the crude and propylene prices, before we announce our May offers later in end-April. At the moment, we are certain prices will not drop,” said a key GCC PP maker.

According to ICIS data, spot PP prices surged 21% since the start of the year on the back of rising raw material costs.

 “The struggle is there. On one hand, we have to cover our costs. On the other hand, we have to take care of our customers. It is really tough,” said another GCC producer.

Meanwhile, PP prices will likely be supported by tight supply through June as two major Saudi Arabian PP producers are scheduled to take their facilities off line for turnaround. (Please see table below)

Rabigh Refining and Petrochemical (PetroRabigh) is expected to shut down its whole petrochemical complex, including a 700,000 tonne/year PP facility, for scheduled maintenance in late April.

In May, National Petrochemical Industrial Co (NATPET) will take its whole Yanbu complex off line for a 60-day turnaround. The complex includes a 400,000 tonne/year PP plant.

“Two large players in the region are out of the market in May, this will definitely has an impact in the region and even to export regions,” said a UAE-based trader.

PP supply in the Middle East market is currently tight with the 150,000 tonne/year plant of Kuwait’s Petrochemical Industries Co (PIC) currently undergoing maintenance, and with two other producers running their plants below capacity.

PIC plans to restart its plant in Shuaiba, which was shut on 10 March, on 8 May.

Oriental Petrochemical Co (OPC) of Egypt is operating its 160,000 tonne/year PP unit at about 80% of capacity because of disruptions in supply of propylene from Libya.

For Oman Polypropylene (PP), technical problems prevent its 340,000 tonne/year PP unit from running at full tilt.

PP demand was moderate in the GCC region, but slightly sluggish in a couple of the countries in the East Mediterranean region such as Syria and Egypt on political tensions.

But converters are getting increasingly worried over the strong PP prices that are constraining their operations, market sources said.

“Converters had to restock their inventories in May, as they have been operating on hand-to-mouth basis for the past few months,” said a regional PP maker.

“Producers like us will ensure quantities to our key customers, but we can’t cater to the small to mid-sized end-users,” he said.

Middle East PP plant turnarounds

PP raffia/propylene price graph

($1 = €0.69)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Ong Sheau Ling
+65 6780 4359

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