21 November 2012 16:00 [Source: ICIS news]
LONDON (ICIS)--A major Middle East producer on Wednesday said it plans to increase its December polyethylene (PE) and polypropylene (PP) export offers into Africa, despite persistent bearish sentiment in the key Chinese and European markets.
Any hike in the offers - which are to be officially announced next week - are likely to come as a surprise to the polyolefins industry.
The producer said it sees an "opportunity" in the market and is counting on low inventory levels across the PE and PP value chain to push buyers back into the market, and ensure sellers can refrain from pricing aggressively.
"Talking about next month, we see an opportunity to increase prices. Stock levels are low in the value chain. Converter stock levels are low, also the suppliers," the producer source said.
Industry sources said the offers are likely to go through only in select regions in Africa, depending on the particular credit system in place.
A distributor selling across Africa said: "[The producer] is trying to increase prices. In east and north Africa, people will accept because they will get ninety days credit. If you do not utilise the credit, they will cut it the next month."
However, the offers are unlikely to go through in western Africa, the distributor said. The distributor described western Africa as an "open market" where buyers have comparatively easy access to credit and thereby the flexibility to resist higher offers.
"In west Africa they have increased offers of copolymer PP by $30/tonne. I don't think buying will happen at this level. Also, Nigeria can miss a buying cycle as the lead time [for delivery] is long."
PP offers are likely to be offered at a rollover to an increase of up to $20/tonne (€16/tonne) in December, while certain grades of PE could be offered at an increase of up to $50/tonne, the Middle East producer source said.
"Some suppliers are having a turnaround next year, so they are trying to build up their stock. They will not be aggressive next month," the producer source said.
UAE's Borouge plans to shut its polyolefins facilities at Ruwais, Abu Dhabi, in December this year and in February 2013 for maintenance.
Two lines of linear low density PE (LLDPE) – each with a nameplate capacity of 300,000 tonnes/year – will be shut this December, while its high density polyethylene (HDPE) and PP plant will be shutdown next year.
In addition, the unplanned shutdown at Saudi Arabia's Saudi Polymers this month will exert upward pressure on HDPE and PP prices in December, the source said.
Saudi Polymers suspended operations at its facilities in Al-Jubail, Saudi Arabia, over the weekend of 10-11 November, with the shutdown expected to last around four weeks.
The company only started full commercial operations at its Al Jubail HDPE production site in Saudi Arabia on 1 October. It has a 1.1m tonne/year HDPE facility and a 400,000 tonnes/year PP unit at the site.
"HDPE will increase $30-50/tonne depending on the region. In north Africa, it will increase. In South Africa, prices will fly," the source said, adding that the force majeure at South Africa's Safripol meant it could comfortably sell HDPE at an increase.
Looking ahead, the Middle East producer said it also expects prices to go up early next year because of the scheduled month-long HDPE and PP plant shutdown at Borouge from February 2013.
Borouge's 800,000 tonnes/year PP plant and 540,000 tonnes/year HDPE plant are expected to be shutdown for about a month from February 2013.
Market sentiment in Africa remains bearish and other Middle East producers are not expected to offer price increases, other industry sources said.
A second Middle East producer, that offers PE and PP on a weekly basis into Africa, said: “PP demand is there, but PE demand is still weak, especially for LDPE.”
A third Middle East polyolefin producer said it had no plans to increase its December offers, and added it plans to roll them over from November.
"In some regions [we will even offer a] $10/tonne decrease," it said.
The majority of Middle East PE, PP offers are expected to be announced next week, ahead of the 7th annual Gulf Petrochemicals and Chemicals Association (GPCA) forum on 27-29 November.
Additional reporting by Ong Sheau Ling
($1 = €0.78)
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