25 January 2012 16:03 [Source: ICIS news]
LONDON (ICIS)--Middle East producers have increased February polyethylene (PE) film-grade offers into Africa by up to $70/tonne (€53.9/tonne) on bullish market sentiment in Asia and Europe, they said on Wednesday.
Most offers were announced on Tuesday and Wednesday.
“January was the lowest in terms of margins for naphtha-based producers. Producers must restore part of their margins to continue their business, and they have to do that in February,” one major Middle East-based producer said.
The increased offers into Africa are mostly in line with hikes in PE prices in both Europe and Asia, producers said.
PE prices in Europe and Asia increased in January largely on production cutbacks in both regions, as well as hikes in feedstock naphtha and ethylene prices.
Many Middle East PE manufacturers, however, ran plants nearly at full capacity in late 2011 on comparatively lower production costs, and their supply into Africa remains healthy.
Despite the good levels of supply from the Middle East, “the market is always driven by the high-cost producer”, the Middle East producer source added, referring to naphtha-based producers in Asia and Europe, which have led the bullish sentiment in the PE markets on grounds of narrow margins.
A second Middle East producer said: “The increased offers are designed to send a signal to the market that prices are going up.”
Buyer acceptance of the increased offers has yet to be confirmed, producers said.
Among the different film grades, high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) have seen the highest rises in offers.
Low density polyethylene (LDPE) is still considered more expensive in Africa compared with other regions, and producers remain cautious about introducing sharp price hikes for fear of stalling demand recovery.
“The price gap is still substantial between LDPE and LLDPE in the area [Africa],” the first producer said.
Increases for LLDPE are at $50–70/tonne, while those for LDPE are rarely above $40/tonne.
A few producers based in the Middle East have yet to announce their offers, which are expected to be posted within the week.
“We will officially announce our offers on Saturday [with] increases of $50–60/tonne,” said a third Middle East producer.
Most producers in the Middle East announce offers into Africa on a monthly basis. Africa is a net importer of PE.
($1 = €0.77)
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