OUTLOOK ‘13: Mideast PE pipe grade likely to be steady in Q1

28 December 2012 01:37  [Source: ICIS news]

By Prema Viswanathan

Mideast PE pipe grade prices likely to rise in Q1 2013 SINGAPORE (ICIS)--Prices of pipe grade polyethylene (PE) in the Middle East are set to be stable in the first quarter of next year on the back of supply constraints, despite subdued demand, industry sources said.

Restocking activity in the key China market in January ahead of the Lunar New Year holidays was expected to provide a further boost to pipe grade prices in the Middle East, they added.

"Supply of black high density PE (HDPE) pipe, which is most commonly used pipe grade in the Middle East, has been in short supply in recent months due to production issues," said a Dubai-based end user.,

Borouge, a key pipe grade PE supplier in the Middle East is currently conducting a phased turnaround at its facility at Abu Dhabi in the United Arab Emirates from late November 2012 until late-February 2013.

The turnaround at the facility, which has a nameplate capacity of 1.2m tonnes/year of PE, has severely restricted supply of HDPE pipe in the region, said traders and end-users.

Tight supply has also been caused due to a decision by some pipe-grade makers to switch to other grades, such as HDPE blow-moulding, for which buying interest has been stronger.

Prices of black pipe grade HDPE in the Gulf Cooperation Council (GCC) region have risen by 9% in the past six months to touch $1,590/tonne (€1,193/tonne) CFR (cost & freight) GCC on 20 December, according to ICIS pricing data.

Although the last quarter of the year is typically the low season for PE pipe in the Middle East, buyers' expectations of a price decline were belied as suppliers refused to bring down offers because of tight supply, said a Dubai-based trader.

"End-users have been maintaining hand-to-mouth inventories in the GCC in the hope that prices will come down, but this did not happen," said a separate end-user.

Demand is expected to grow by 5-6% in the GCC for pipe grade PE in 2013, with Saudi Arabia set to grow at a slightly higher rate of 7%, market players said.

"The government in Saudi Arabia has been very pro-active in commissioning infrastructure projects such as water supply and construction, and this has provided a boost to pipe grade PE," said a supplier.

However, construction activity in the UAE is still sluggish following the global economic meltdown in end-2008, dampening demand for pipe.

"Demand for pipe grade PE in the UAE is not expected to grow at more than 4% in 2013," said the Dubai-based end-user.

In Oman, government-led infrastructure projects have been delayed, but 2013 may see an acceleration of project activity, said an Oman-based end-user.

The slowing of buying activity in the Middle East in recent months has seen several regional suppliers turning to more buoyant markets where netbacks are higher - such as Africa, Turkey and South America, traders said.

Suppliers of pipe grade PE in the Middle East include Borouge, Saudi Ethylene and Polyethylene Co (SEPC) and SABIC.

($1 = €0.75)

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

By: Prema Viswanathan
+65 6780 4359

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