FocusAfrica PE markets could resist Asia, Europe bullishness in Feb

19 January 2012 14:14  [Source: ICIS news]

Polyethylene is used in food packagingLONDON(ICIS)--Polyethylene (PE) buyers in Africa are resisting persistent producer efforts to increase import spot prices for a third week in a row, with the trend likely to continue into February, sources said on Thursday.

Producers that regularly export to Africa and Asia acknowledge that their attempts to close deals at higher levels in Africa have been largely unsuccessful, while in Asia prices have risen.

“It’s not going to be a very easy ride. We are seeing some slight demand destruction even in developing countries,” said a distributor that regularly exports to Africa.

The uncertainty caused by the weak EU-influenced Moroccan economy, elections planned in Kenya this year, recent fuel protest strikes in Nigeria and political unpredictability in Egypt are all contributing to weakening demand in the key PE national markets of Africa.

PE prices have largely remained stable for January at $1,300–1,500/tonne (€1,667-1,923/tonne) CFR (cost & freight) northern Africa, in contrast to Asia and Europe.

“Markets have been quiet, [with] converters waiting to restart. Large markets like Nigeria have been away, eastern and western Africa are quiet. Only offers, no deals. They are expecting a rollover,” said a distributor that sells PE across Africa.

Trade remains scarce in Egypt. There is strong buyer resistance to import offer levels from Middle East producers because buyers are having trouble securing credit in the form of US dollars to pay importers.

“Egypt is still bad. We haven’t done much business because they are not meeting our prices,” said a major Middle East-based producer.

But most producers based in the Middle East that regularly export to Africa and Asia are quick to point out that they are unwilling to lower offers.

If buyers in Africa refuse to pay higher prices, we will take offers to Asia, where sentiment has been bullish recently, said the producer.

“In terms of price expectations, there is certainly a gap. But we have been a bit firm in our prices because of the bullish sentiment in Asia,” the producer said.

But most buyers are banking on Asian markets to show slow demand after next week’s Lunar New Year holidays. This would put downward pressure on February offers from Middle East producers.

Additionally, buyers argue that supply from importers is balanced to long, despite some production cutbacks in Asia, because of healthy output from Middle East manufacturers.

Contrary to buyer expectations, producers plan to announce higher offers in February because of bullish sentiment in the markets for European and Asian PE and feedstock ethylene.

Most producers are confident that if prices in Asia increase after the Lunar New Year holidays, Africa will follow suit.

“Africa, as a continent, is more and more dependent on what is happening in Asia, said a second Middle East producer.

February offers are expected to be announced in the last week of January.

($1 = €0.78)

For more on PE visit ICIS chemical intelligence

By: Cuckoo James
+44 (0) 208 652 3214

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