Africa LDPE, PP still under pressure from EU offers

04 July 2012 16:38  [Source: ICIS news]

LONDON (ICIS)--An influx of cheap European product has compounded the downward pressure on July African polyolefins prices - initially caused by a surplus in Middle Eastern supply, industry sources said on Wednesday. 

The low-priced European offers were set in motion in June by a slow European market. The number of offers have now accelerated because of a €170/tonne drop in the July European ethylene and propylene feedstock contract prices.

On Wednesday, low density polyethylene (LDPE) offers from Europe into the geographically proximate northern and western Africa were at $1,260-1,300/tonne CFR (cost and freight) in dollar terms, bringing prices down to levels last seen in late 2009.

Meanwhile, European polypropylene (PP) offers were at $1,300-1,330/tonne CFR in northern and western Africa, distributors said.

"We see EU material being offered around the place," said a Middle East PP producer.

Even producers stationed in both the Middle East and Europe have used the opportunity to offer from Europe to northern African, especially to countries such as Algeria where import duty on European product is more lax, said a polyolefins producer based in Asia.

There is no tax on product sold into Algeria from Europe, whereas the country imposes a 5% tax on Middle Eastern product. Polyolefins are usually supplied from the Middle Eastern branches of these producers, the source added.

The Middle East is Africa's chief supplier of LDPE, and one of the chief suppliers for PP, along with Asia. Product from Europe were normally offered on an ad-hoc basis.

A major Middle East producer said it was under pressure to sell at a lower price because of the lower-priced European product.

Polyolefins demand is picking up in both northern and western Africa because of a general perception that prices have now bottomed out, and could start rising in the near future because of the upturn in Chinese polyolefins prices.

Sales in northern Africa is additionally bolstered by the fast-approaching Ramadan period, which will begin in the second half of July.

"There has been a bit of extra buying because of Ramadan in Egypt and in northern Africa, they are a bit more active," said a global distributor that sells into Africa.

($1 = €0.79)

Follow Cuckoo James on Twitter

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

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly