29 June 2011 18:53 [Source: ICIS news]
Correction: In the ICIS news story headlined “Africa PP prices drop by $100–140/tonne on S Korea, Mideast offers” dated 29 June 2011, please read in the eighth paragraph …fallen by a total of $120–180/tonne… instead of …fallen by a total of $210–280/tonne… and in the ninth paragraph please read …fallen by a total of $100–120/tonne… instead of …fallen by a total of $120–150/tonne…. A corrected story follows.
LONDON (ICIS)--Spot polypropylene (PP) prices in Africa dropped by $100–140/tonne (€70–98/tonne) this week as South Korean and Middle East producers inundated the continent with low offers, after being faced with persistent low demand in China, market sources said on Wednesday.
“If there is a chance, we will sell to Africa as demand in the Middle East and China is low,” said a Middle East-based producer. “Everyone's heading there and there is ongoing pressure.”
A buyer in North Africa said: “There are lot of offers. We have offers of less than $1,600 from the Middle East and slightly higher from South Korea. That is more than a $300 drop [from last month].”
Mounting inventory levels remain a problem for South Korean producers, whose sales to China have been affected by the low demand in the country. “Producers in Korea are getting desperate to sell copolymer,” said a distributor to Africa.
Suppliers from South Korea are dropping prices as they had built up a huge inventory in May, said another distributor which regularly supplies product from the country to Africa. “Today is a buyers' market. You cannot always apply logic when the market is crashing. You have to minimise your losses, and so you sell.”
Middle East producers are in a similar dilemma as demand in the region has not risen as expected ahead of Ramadan. Additionally, Middle East sales to China have been slow, leading to mounting inventories for the producers.
This week's major price drop means that PP prices have fallen by a total of $120–180/tonne in June in the northern, eastern and western regions of Africa, bringing prices back to levels seen at the beginning of the year.
In southern Africa, prices have fallen by a total of $100–120/tonne in June. The reduction has not been as drastic as prices were already comparatively low due to the high inventory levels held by local producers that hold a major share of the market.
However, most suppliers agree that despite the major drop in prices this week, demand continues to be weak as buyers expect a further price fall in July.
The North Africa-based buyer said: “We are waiting for July offers. All suppliers are offering material, but we are afraid prices will drop more. [On the other hand] we will buy [just] when it [prices] starts to pick up.”
July offers from the Middle East and South Korea are expected later this week. Prices in July should fall by at least $30/tonne just on the basis that two Middle East PP producers, Saudi Arabia’s Petro Rabigh and Natpet, will restart their plants during that month, said a major Middle East-based producer.
Prices for homopolymer raffia PP grade are currently at $1,550–1,590/tonne CFR (cost and freight) northern Africa (used as a reference point here). Block copolymer PP is at $1,590–1,620/tonne CFR northern Africa.
($1 = €0.70)
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