July Africa polyolefin spot prices may stabilise, possibly increase

06 July 2011 11:08  [Source: ICIS news]

July Africa polyolefin spot prices may stabiliseLONDON (ICIS)--There are early indications that the recent polyolefin spot price decreases in Africa will come to a stop and prices will increase in July, before falling again in August, buyers and sellers said on Wednesday.

The change in industry perceptions follows on from signs of improved demand in both international and domestic markets for polyethylene (PE) and polypropylene (PP).

“We think the price decrease in Africa has come to a stop because everyone is becoming aware that buying interest in China has gone up,” a polyolefin producer in the Middle East said, reflecting on the change in market sentiment towards the end of last week.

“Customers are seeing the levels bottoming out. The price drop during the last months is huge. I think we will hold prices stable until August, because of the Chinese buying interest,” a Middle East-based PP producer added.

A couple of producers who had been offering aggressively in the market, due to high inventories, have already rolled out higher offers.

A distributor for a PP producer based in South Korea, which is a key supplier to Africa, said the producer increased its July copolymer PP offers to the continent by $10–50/tonne (€7–35/tonne) as demand improved in China.

“The market changed starting end of last week,” said a second polyolefin producer, who added it increased its offers by $50/tonne as it observed improved demand in northern and western Africa.

A third Middle Eastern polyolefin producer said the relatively stable crude prices and low buyer inventories helped it secure increases in India last week, adding that it expects the same to happen in northern and western Africa in the next couple of weeks.

“It’s like a wave. Demand had been slow in North Africa due to the political situation. Lots of offers will be received ahead of Ramadan in northern Africa. In western Africa they are very much optimistic in purchasing now, not only because of the upcoming rainy season, [but also due to a] lot of shortage from South American producers, which brings them back to Middle East producers,” the producer added.

“I think [the price increase] is justified, as there has been a huge drop. I think a price increase means it is just going back to normal, although I hope it will not increase too much. A range of $1,680–1,700 has been the normal range for the last two years,” a copolymer PP buyer in Egypt said.

A polyolefin buyer based in Egypt said prices are likely to drop after July as Ramadan, the Muslim fasting season, begins on 1 August.

“In August, we have Ramadan [in northern Africa] and rains [in western Africa] and we will see if there are any price corrections,” said a PP producer based in the Middle East, referring to the slowdown expected after July.

Africa spot PP prices rebounded by as much as $50/tonne this week, after falling by $100–140/tonne in the week ending 29 June.

PE spot prices have been relatively stable, with a slight decrease of $20/tonne at the high end of the price ranges in some regions.

July Africa polyolefin spot prices may stabilise, possibly increase

($1 = €0.69)

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By: Cuckoo James
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