FocusMideast PP supply to rise on weak overseas demand

20 June 2012 10:00  [Source: ICIS news]

(recasts, clarifying eighth paragraph)

By Ong Sheau Ling

SINGAPORE (ICIS)--Polypropylene (PP) supply from the Middle East is likely to increase, as the recent sales volume seen in Asia and Europe have been low and import interest in Egypt has weakened because of a recent duty imposed, industry players said on Wednesday.

Middle East PP producers said they are facing a slow build-up in inventories with lower-than-expected buying activity in Asia and Europe over the past few months after prices started to decline from April.

From April to mid-June, spot PP import prices in China, Europe and Turkey fell by $172-390/tonne (€136-308/tonne) or 11.6-21.4%, according to ICIS.

“China is not seeing clear signs of improvement. General market sentiment gets hit,” a Dubai-based trader said.

Asian and Middle Eastern converters are buying on a need-to basis, because of concerns that global economic growth may be derailed.

The eurozone debt crisis in particular weighed on buying sentiment, as Europe is a major export market for many Asian and Middle Eastern plastic finished goods.

“Demand for [PP] resins has waned in Europe, especially with the ongoing summer breaks and with the current exchange rate [from euros to US dollars], exports seem to be more popular instead of imports,” a PP maker based in the Gulf Cooperation Council (GCC) said.  

As a result, Turkey now has access to attractively priced European cargoes as compared to Middle East-origin cargoes.

 “Price competition is high in Turkey, and this worsens our already mounting stock level,” another GCC-based PP producer said.

Apart from the lower sales volume in Turkey and Egypt, which is one of the major export destinations of the Middle East, PP producers said they are concerned about the recent implementation of a 15% duty in Egypt for homopolymer imports, which may hamper their business.

“With all these going on, it is really harder to sell July cargoes, unless our prices are attractive,” a Saudi PP maker said.

Most PP facilities in the GCC region are expected to run at close to full rate or at 100% in July following outages at a couple of PP plants in May and a completed scheduled turnaround at Advanced Petrochem Co’s (APC) 450,000 tonne/year PP unit in end-May.

Saudi Arabia’s Al-Waha Petrochemical in early June shut its 450,000 tonne/year PP plant in Al Jubail for a month-long turnaround, market players said.

“Having less demand and more production output, we have to do something to prevent our inventories [rising] out of hand,” another GCC-based PP producer said.

PP resins are used in applications such as food packaging, cement and agriculture bags, and in the automotive sector.

($1 = €0.79)

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

By: Ong Sheau Ling
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