FocusMiddle East producers upbeat on Feb Africa PE demand

26 January 2012 10:25  [Source: ICIS news]

By Cuckoo James

LONDON (ICIS)--Middle East producers remain confident about achieving higher February polyethylene (PE) export offers into Africa, despite slow trading activity in the African PE market this week, sources said on Thursday.

February film-grade PE offers from the producers have increased by up to $70/tonne (€54/tonne).

Much of the producer confidence stems from recent bullish sentiment in Europe and China, especially the latter which remains a key buyer market for Middle East producers.

A Middle East producer said: “The ones who are already taking the higher offers [in Africa] know prices are increasing in China, they are worried prices will jump more.”

Additionally, the producer expects the recent rain in northern Africa to translate into good demand for PE from the key agricultural sector.

But even this early indication of buyer acceptance of the higher offers comes with a qualification.

“They are taking cautious purchases, not full trucks. [They are buying] only 50% of their demand,” the producer said.

Most producers expect the pace to pick up after the Lunar New Year holidays in Asia.

Among the film grades, producers expect to achieve the highest increase for high density polyethylene (HDPE) because of its tighter availability, and the least for the already-expensive low density polyethylene (LDPE).

“People are waiting to see what will happen after the Chinese holidays,” said a second Middle East producer.

A third Middle East producer added: “China would come back next week, and it will give a boost to the market.”

The producers could succeed in at least pushing through a rollover, thereby avoiding the bearish trend in PE Africa prices seen in the second half of last year, said a regular distributor of imported product into Africa.

“Suppliers are banking on China coming back. We have seen this happen before. If nothing else happens in Feb, they will at least hold onto their offers,” said the distributor.

“We do think part of the buying in China was pre-buying,” said the second producer, adding that this indicates a stronger Chinese demand which will translate into a better demand in Africa sooner or later.

The distributor cautions that a pick-up in demand will not be sudden, if at all, post-Lunar New Year.

“In Africa, they will not accept the $50/tonne. If at all this trend continues, they will accept the higher offers in March. Who knows, suppliers might be under pressure again,” it said.

For more on polyethylene visit ICIS chemical intelligence

By: Cuckoo James
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