13 November 2011 07:26 [Source: ICIS news]
By Ong Sheau Ling
SINGAPORE (ICIS)--Most of Middle East-based polymer plants are expected to continue running at near-full capacity for the rest of the year, as low production costs assure them of healthy margins even though polymer prices are on a decline, industry sources said on Thursday.
Given the cheap availability of ethane and propane feedstocks for polyethylene (PE) and polypropylene (PP) production, Middle East producers have the competitive advantage to offer at lower prices compared with their counterparts in Asia that mostly use expensive naphtha as feedstock, they said.
“We are still able to sell to our customers, although quantities have [been] reduced,” a key Saudi PE, PP producer said.
Saudi linear low density polyethylene (LLDPE) film was sold by producers at $1,140-1,160/tonne (€832-847/tonne) CFR (cost and freight) ?xml:namespace>
Spot LLDPE film prices in China slumped by $215/tonne or 15.6% from early August to an average of $1,160/tonne CFR China on 28 October, according to ICIS.
Ethane gas price in
Concerns about the eurozone debt crisis, the weakness of the
“Christmas is just next month and the end of the financial year is drawing in. Demand in Europe will worsen further, with European and US producers clearing their stock levels, this will pressur[e] the Middle East producers to seek outlets further east, pressing down the prices there,” a Dubai-based trader said.
For a few of the producers hit by technical glitches that disrupted plant operations in the third quarter and those that suffered logistics problems because of congestions at the Dammam port in Saudi Arabia, and at the Khalifa and Jebel Ali ports in the UAE, plants must be kept running at high capacity to clear their backlog orders, industry sources said.
The plants resumed operations on 19 October after maintenance.
Middle Eastern producers are doing the exact opposite of production cuts being implemented by their South Korean and European counterparts amid lacklustre demand from key markets, such as
“I do not understand why the
Asian producers currently generate thin margins from sales of LLDPE and LDPE films and it remains unclear whether these producers will reduce operating rates in the near term.
In the week ending 28 October, integrated LDPE margins in
Additional reporting by Chow Bee Lin
($1 = €0.73)
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