Buyer resistance to weigh on Africa PE, PP May prices – producers

25 April 2012 11:19  [Source: ICIS news]

These are plastic bottles.LONDON (ICIS)--A concerted attempt to roll over Africa’s polyethylene (PE) and polypropylene (PP) May import prices could be thwarted by strong buyer resistance to high-priced product, producers from the Middle East, South Korea and India said on Wednesday.

“This month we will try to roll over, if not we can then give certain customers an incentive just to maintain the flow of quantity,” a Middle Eastern PP producer that offers into Egypt said.

Other producers based in the Middle East, South Korea and India – Africa’s major polymer suppliers – are keen to do the same to keep their margins, while trying to coax reluctant buyers into purchasing.

“The markets are as stagnant as could be,” explained a Middle Eastern PE producer that offers across Africa.

Trading of both polymer grades has been slowing during the second half of April on high naphtha costs following a steady rise in prices in 2012 up to that point.

PE prices have increased by up to 12% on average from December last year to April 2012, while PP prices rose by up to 13% for the same time period.

“Most of the buyers think the increase was too rapid, and it could be corrected soon,” said the PE producer.

Meanwhile, South Korean PP producer Honam Petrochemical Corporation (HPC) – which exports across Africa – said it is planning to shut down its PP facilities in South Korea in May if margins from its sales do not improve.

“I know the PP market is slow.… I expect [the] quantity [for] export will be reduced around 20,000MT [tonnes],” a source at HPC said.

Traditionally, South Korean offers are introduced into Africa two weeks ahead of Middle East offers, most of which are announced towards the end of the month, and are a good indicator of initial buyer response.

A distributor that supplies South Korean product across Africa said: “Koreans are ready to negotiate on PP and PE [and] asking for firm bids. Now it seems all are holding huge inventories [because of] still sluggish demand from China and poor demand from the Indian market.”

“Two weeks ago Korean producers were claiming [they were] getting good net back in Europe so they were not being aggressive in the African markets, but this week the scenario seems to be changed,” the source added.

An Indian producer that supplies PP to Africa said: Demand in India has been lacklustre in the past few days. It’s the same in Africa. All customers are buying hand-to-mouth. It could be either due to good inventories or they have reduced their consumption. They might be expecting prices to go down.”

We don’t see a firming of prices. Prices are stable,” the producer added.

Apart from South Africa, which has large-scale local production capacity, Africa is a net importer of PE and PP.

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

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