28 June 2011 12:43 [Source: ICIS news]
SINGAPORE (ICIS)--Spot polypropylene (PP) prices have tumbled by around $140/tonne, an 8% fall for July cargoes in the Middle East from June, as producers in the Gulf Cooperation Council (GCC) region slashed offers after the recent price fall in the China market, industry sources said on Tuesday.
On Tuesday, prices for PP raffia were discussed at $1,510–1,530/tonne (€1,057-1,071/tonne) DEL (delivered) Dubai and at $1,470–1,480/tonne DEL Saudi Arabia, regional players said.
PP prices have fallen by nearly 12% since a downturn began in mid-May from a 10-month high.
GCC producers have had to reduce offers in a bid to attract buyers in a bearish market, and to reduce mounting inventories.
Regional makers said that they had no plans to reduce operating rates, but instead aimed to seek more outlets for their products, such as Africa.
“[The] Egypt and Turkey markets are no longer as lucrative, we have to try to achieve better margins elsewhere,” a Saudi maker said.
In Egypt, import prices of PP raffia were on par with those in Syria, at $1,550/tonne DEL.
Fierce price competition in Jordan caused prices in the East Mediterranean (East Med) to fall to the same level as those in Dubai.
“Based on the freight difference, there should be a price gap of about $30–40/tonne between East Med and GCC, but now there is nothing,” a second Saudi maker said.
A Dubai-based converter said: “Prices are crashing. And we have some inventories which are of higher cost. This is not good.”
Demand in the Middle East is expected to improve slightly in July, but players agree that there is now no distinct peak season.
“Unless the sentiment gets lifted up by an improved China market, we will unlikely see any strong demand ahead of Ramadan,” a second Dubai-based converter said.
Ramadan, the Muslim fasting month, will begin on 1 August, when demand will start to dwindle as downstream converters prepare to slow down their operations.
“July is our last hope of good sales before the festive season, but the downtrend in prices is negating the buying sentiment,” a third Saudi producer said.
“July may not be the bottom price, as the market has not [felt] the full impact yet from the restart of Petro Rabigh and Natpet,” a GCC maker said.
Saudi Arabia's Petro Rabigh and Natpet are expected to restart PP plants in July, following annual maintenance.
Increased supply PP availability in the second half of July will weigh further on prices, industry players said.
“Even if the demand in China picks up in August it will be offset by the weaker demand in the Middle East and Europe, due to the ongoing slow business as many regional players take their summer vacation,” the GCC producer said.
A fourth Saudi maker said: “In August, prices will likely hit a new bottom and what we can hope for is that the correction will be minor.”
($1 = €0.70)
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