FocusSaudi, India PP makers in price war over Pakistan market

09 December 2011 05:13  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Saudi and Indian polypropylene (PP) producers, saddled with high inventory, are aggressively competing in the Pakistani market, which is perceived as buoyant compared to the sluggish markets across Asia, Europe and the Middle East, industry sources said on Friday.

Expecting prices to fall amid the price war, Pakistani converters retreated to the sidelines, they said.

Spot prices of PP raffia/injection for December shipments were at $1,320-1,350/tonne (€990-1,013/tonne) CFR (cost and freight) Karachi this week, down $40-50/tonne or 3.2% lower from two weeks ago, market sources said.

A Saudi major has reduced its offer for December parcels by a total of $90/tonne over three weeks to $1,330/tonne CFR Karachi, LC (letter of credit) 90 days, for raffia/injection on 7 December, Karachi-based traders said.

Wide-spec raffia materials were offered by the Saudi major at $1,290/tonne CFR Karachi for December cargoes, they added.

The producer was trying its best to push sales amid a build-up of inventories at the Dammam port, Saudi Arabia, as its production increased but sales turned out poor in the overseas markets, market players said. Its move to cut prices was matched by its Indian competitor.

An Indian PP maker offered PP raffia/injection at $1,370-1,420/tonne CFR Lahore/DAP Attari or about low $1,300s/tonne CFR Karachi for December delivery, Karachi-based traders said.

Following that, three other Middle East makers have lowered their offers for December shipments to $1,330/tonne CFR Karachi, LC 90 days, while another Saudi producer, which is not in a hurry to liquidate stocks, offered the remainder of the December lots at $1,350/tonne CFR Karachi, LC 90 days.

“Offers have been decreasing week by week for December cargoes. This is not a good sign,” a Karachi-based trader said.

“The downstream demand here is just moderate, but the supplies are too much. Prices can’t hold,” another Karachi-based trader said.

A softer China market, the biggest for PP, is also dampening buying sentiment among Pakistani buyers, traders said.

On 2 December, the average weekly PP raffia/injection prices were at $1,365/tonne CFR China, down by $20/tonne from the previous week, according to ICIS.

“Many of the sellers have gradually offloaded their high stock levels. So, sooner or later, the producers should stop dropping their prices,” a Saudi PP maker said.

“The outlook [is] still uncertain, but we do agree that there are no strong bullish factors to boost prices for January cargoes,” another Saudi market said.

($1 = €0.75)

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

By: Ong Sheau Ling
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