FocusPakistan PE, PP may extend slump on softer China market

28 October 2011 09:33  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Spot prices of November polyethylene (PE) and polypropylene (PP) cargoes to Pakistan declined $115-210/tonne (€81-147/tonne) from early August, in line with weakness in the key China market, market players said on Friday.

Prices may continue falling amid an oversupply of polymers in the south Asian country, they said.

For cargoes coming from the Gulf Cooperation Council (GCC), deals were heard settled this week at $1,380/tonne CFR (cost and freight) Karachi for PP raffia and discussions were heard at $1,400-1,480/tonne CFR Karachi for low density PE (LDPE) film, market sources said.

Cargoes of linear low density PE (LLDPE) films of GCC origin have also exchanged hands at $1,240-1,260/tonne CFR Karachi, while high density PE (HDPE) film cargoes were also traded at $1,280-1,330/tonne CFR Karachi, they said.

For the week ended on 21 October, ICIS reported LDPE film at $1,440-1,480/tonne CFR Karachi, $1,240-1,270/tonne CFR Karachi for LLDPE film, $1,300-1,350/tonne CFR Karachi for HDPE film and $1,400-1,440/tonne CFR Karachi for PP raffia.

“Discussions for November cargoes are almost closed. Moving ahead for December parcels, the price outlook is still looking bleak,” said another Karachi-based trader.

“There are too many unpredictable factors affecting the macroeconomic global situation. Unless the fear of the eurozone crisis is erased, we are certain to say PE, PP price fall will stop,” another Karachi-based trader said.

GCC-based producers had lowered their offers this week to draw buyers, whose price ideas were largely on par with the values quoted in the leading China market. (Please see graph below)

“Initial offers announced for November cargoes last week did not meet much buying interest. As a result, several producers reduced their offers this week,” a Karachi-based trader said.

China PE, PP prices have tumbled in the past few weeks to levels which were much lower than the October settlements in Pakistan.

Producers offering cargoes to Pakistan have had to bring down their offers, otherwise,

no buyer would come forth, particularly since the south Asian country remains in oversupply of polymers, Karachi-based traders and converters said.

“Middle East producers did not sell as much quantities to China or to Europe over the past couple of months because of sluggish demand. Plus, the congestions at the ports in Saudi Arabia and UAE exacerbated their mounting inventory pressure. They have to seek to sell to every possible outlet. In order to do that, their offers must be attractive,” a key Karachi-based trader said.

Congestions at the Dammam port in Saudi Arabia, and Jebel Ali and Khalifa ports in UAE are still normalising, with the affected producers still in the progress of clearing their order backlogs, Middle East PE, PP resins makers said.

Pakistani traders and converters were initially not eager to initiate discussions because of more than sufficient stock levels amid a flat downstream market.

Nevertheless, buying activity improved early this week, in response to the halt in the price decline of LLDPE futures in China, market players said.

“Improved LLDPE futures in China and firmer crude futures have boosted converters’ confidence to come forward to book new materials,” a Middle East PE, PP producer said.

A positive development on the eurozone debt situation has somewhat lifted sentiment in the commodities markets this week.

“Whether this is sustainable and will lend support to the PE, PP resins prices, it is still questionable,” said another key Middle East polyolefins producer.

PE, PP price graph

($1 = €0.70)

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

By: Ong Sheau Ling
+65 6780 4359

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