GCC PP makers hold May offers high on fewer imports in Pakistan

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

By Ong Sheau Ling

SINGAPORE (ICIS)--Gulf Cooperation Council (GCC) polypropylene (PP) makers announced their May offers this week at levels similar to, or at $10-20/tonne (€6.90-13.80/tonne) higher, than those for April shipments. The uptrend is a result of impending turnarounds at PP units which are expected to lower Pakistan’s imports, industry sources said on Friday.

“Two producers are out of the market because of the upcoming turnarounds, so the market is tighter. We have no choice but to raise offers across the board,” a PP maker in the GCC said.

In addition, the persistent strong upstream propylene levels at $1,550-1,580/tonne CFR (cost & freight) NE (northeast) Asia were of no consolation to PP makers, as their spread remains below breakeven points.

PP makers in the GCC quoted a wide range of spread of $150-200/tonne between propylene and PP to achieve a decent margin, which varies with producers.

PetroRabigh's 700,000 tonne/year PP unit at Rabigh has been shut since 22 April for annual maintenance of up to 60 days, resulting in limited material offered for May and June shipments, sources said.

National Petrochemical Industrial Co (NATPET) is taking its PP unit at Yanbu off line from 1 May for a similar duration, and was heard to have sold out for May at levels of $1,730-1,740/tonne CFR Karachi for raffia grade.

A key Saudi producer offered raffia grade on 20 April at $1,760/tonne CFR Karachi, LC (letter of credit) 90 days, and $1,770/tonne CFR Karachi for injection grade. These prices were $10/tonne higher than April’s level.

A second Saudi maker lowered its prices on 20 April for raffia grade by $10/tonne from its initial offer at $1,770/tonne CFR Karachi, LC 90 days, which was a $20/tonne increase from the previous month.

Also on 20 April, a third Saudi producer offered both injection and raffia grades at $1,735/tonne CFR Karachi, LC at sight, similar to April.

Other PP makers in the GCC are planning to make their offers early next week, with selling indications similar to the key Saudi producer’s offer.

“There is no way we can lower our offers. The lowest we will go is to roll over if converters do not accept our initial offers,” said a PP maker in the GCC.

“Offers are starting to filter through the market, but cheaper Indian material is hindering business for GCC cargoes,” a local trader said.

An Indian major has been selling May raffia material at $1,720/tonne CFR Karachi, LC 30 days since the previous week, but the producer did not specify when the offer was first made.  

“Perhaps GCC material will be rejected at first, but eventually converters who cannot get products will pay the price,” another local trader said.

However, a Saudi offer made on 21 April for raffia grade was at $1,710/tonne CFR Karachi, LC 60 days, which is lower than the remaining GCC offers.

“The producer may be trying to get a larger market share by offering at a more competitive price level. However, this offer is not available to most buyers. Furthermore, their quantities are limited, so we can’t regard this as the mainstream price,” a key importer based in Karachi said.

Improved demand is expected in the downstream PP sector in the next few months, particularly in the agricultural industry where more raffia grade PP will be used for the packaging of grains harvested in the summer.

Key applications of PP include packaging, fibres and automotive parts.

PP producers based in the GCC include SABIC, National Industrialisation Co (TASNEE), Al-Waha Petrochemical, NATPET, PetroRabigh, Advanced Petrochemical Co (formerly known as APPC), Oman Polypropylene and Borouge.

For more on polypropylene, visit ICIS chemical intelligence
For more pricing intelligence, please visit ICIS pricing
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Ong Sheau Ling
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