Focus Mideast PE, PP prices to slide in July on soft overseas market

21 June 2012 08:21  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Middle East spot polyethylene (PE) and polypropylene (PP) prices will likely fall for a second straight month for July parcels, tracking the recent months of steep declines in Asia and Europe, market players said on Thursday.

The outlook is bearish also because of a gradual built-up in Middle East producers’ inventories, they added.

Average spot PP prices in the Gulf Cooperation Council (GCC) tumbled by $145/tonne (€115/tonne) or 9.3% to land on $1,410/tonne CFR (cost and freight) in mid-June for June delivery, after hitting a seven-month high in April, according to ICIS.

For linear low density PE (LLDPE) film, average spot prices fell by $105/tonne or 7.4% to reach $1,315/tonne CFR GCC within the same time frame.

A larger decrease was also seen in overseas markets.

Spot PP import prices in China, Europe and Turkey fell by $172-390/tonne or 11.6-21.4%, while LLDPE film import prices in China and Europe fell by $220-415/tonne or 15.5-23.3%, ICIS data showed.

“The price decrease seen in [the Middle East] is small compared with the overseas markets,” a major film converter based in United Arab of Emirates (UAE) said.

“There is still room for prices to fall here,” the converter added.

Middle East and Asia market are closely-linked, a GCC-based PE, PP producer said.

“With Asia declining so much already, Middle East has to reflect the decreases,” the producer added.

Besides tracking the price fall in Asia and Europe, the mounting stock levels at polyolefins producers in the Gulf weighed on price ideas.

“Our [LLDPE film] inventories are on the higher side. July offers will be lowered to stimulate buying, so we could better manage our stock levels,” a major Saudi PE, PP producer said.

The building up of inventories at GCC-based polyolefins makers was a result of the poor sales volume seen in Asia and Europe in recent months.

In particular for PP, a recent duty imposed in Egypt will curtail the import demand, leading to GCC-based producers to seek ther outlets.

“Prices will likely shed, rather than tumbling again, in the condition that Asia’s prices keep stable,” a low density PE (LDPE) and LLDPE producer based in the Gulf said.

Moderate demand in the Gulf region in July will cap the price decline to be small, industry players said.

“Demand for most PP and PE grades has been relatively robust in June and we expect July to be similar,” a Saudi Arabian converter said, adding that healthy downstream demand was because of the upcoming Ramadan and Eid festival.

Ramadan begins in mid July, while Eid festival starts in mid August.

“Traders and converters’ inventories are low. They have been buying on a need-to basis since April. So, they will have to restock for July,” another Saudi Arabian PE, PP producer said.

($1 = €0.79)

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

By: Ong Sheau Ling
+65 6780 4359

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