FocusMideast PE, PP buying slows on high offers amid Ramadan

31 July 2012 09:58  [Source: ICIS news]

By Ong Sheau Ling

SINGAPORE (ICIS)--Buying activities in the Middle East spot polyethylene (PE) and polypropylene (PP) resins market have slowed down during observance of the Muslim fasting month of Ramadan, with regional converters deeming the current August offers as too high, industry sources said on Tuesday.

A major Saudi producer announced a $30-70/tonne (€25-57/tonne) or about 5% increase in August prices for all PE and PP, except low density PE (LDPE) film, from July, taking into account increases in feedstock costs.

In the Gulf Cooperation Council (GCC) region, excluding Saudi Arabia, linear low density PE (LLDPE) film and high density PE (HDPE) film were offered at $1,290/tonne DEL, and $1,400-1,440/tonne DEL, respectively, while PP raffia was offered at $1,360/tonne DEL, market players said.

August prices of LDPE films, on the other hand, were rolled over from July at $1,400/tonne DEL GCC, they said.

Over a four-week period to 27 July, prices of feedstocks naphtha, ethylene and propylene have gone up by 1.7-6.7%, according to ICIS.

A largely stable key China market in July also boosted GCC-based producers’ confidence in raising August offers, industry sources said.

Middle East traders and converters are, however, reluctant to accept the current offers, with those needing to restock are just buying sufficient quantities to cover their immediate needs, market players said.

Some are saying that the higher August offers are not justified, given subdued demand for the polymers as regional converters have previously stocked up on cargoes in preparation for the month-long Ramadan, which began on 20-21 July, they said.

“The producers have to consider the current demand. It is Ramadan, demand is weak,” a key Saudi converter said.

“We are pretty upset with the increase and based on the pricing mechanism here, we have limited room [for] negotiation,” another major Saudi processor said.

In the Saudi Arabian domestic market, August settlements for LDPE film were unchanged from July at $1,400-1,450/tonne DEL.

For LLDPE films, August prices in the Saudi market was $50-70 higher from July at $1,240-1,300/tonne DEL, while HDPE film prices rose $50/tonne to $1,330-1,370/tonne DEL. PP raffia prices were $50-60/tonne higher at $1,300-1,350/tonne DEL, market players said.

“We do expect an increase in August – like about $20-30/tonne, but now it is double [that amount],” said a source from a UAE-based processor, which is intending to cut its August purchases.

 “The price rebound now just came at the wrong time. Buyers are not ready,” a UAE-based trader said.

Spot PE and PP prices in the Middle East fell by $190-265/tonne or 13-17% from end May to mid-July, before the recent rebound, according to ICIS. 

“The higher August offers just made things worse. Business is already slow in Ramadan with shorter working hours and now, our customers may just cut their purchases further,” another UAE-based trader said.

($1 = €0.82)

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By: Ong Sheau Ling
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