28 December 2012 03:53 [Source: ICIS news]
By Veena Pathare
SINGAPORE (ICIS)--Middle East’s demand growth for PVC in the near-term is expected to be slow and dominated by restraints as end-users continue to maintain a wary approach amid the global economic uncertainty.
Demand for PVC resin in the Middle East is expected to be largely driven by a marginal uptrend in the Gulf Cooperation Council (GCC) region, as the East Mediterranean demand is expected to be overshadowed by the political instability and turmoil in the region.
Importers in the GCC region, traders and end-users alike, choose to maintain a cautious approach, given the gloomy economic outlook in Europe and a slow economic recovery in the US.
The bulk of the regional PVC requirement comes from the US, with the regional producers and minor imports from Asia catering to the rest.
Consequently, prices in the region, presently at $970-1,010/tonne (€728-758/tonne) CFR (cost & freight) Middle East as on 14 December, are likely to be largely driven up by prices of US-origin cargoes.
Offers from the US producers rose sharply in November-December 2012 as producers hiked their offers for January shipments.
US-based producers are expected to maintain their offers at January levels through the first quarter of 2013 on account of the turnarounds at regional facilities, said market participants.
Although PVC demand growth in the Middle East in 2012 was second only to that of the fastest growing developing economies in Asia Pacific, market players said that the pace of growth of PVC and capacity development in the region has traditionally been affected by better opportunities and margins in olefins, said a regional trader who regularly imports into the region.
In recent times, however, the region’s interest in multiple large scale construction projects has renewed interest in PVC, with demand growing faster than expected.
According to a number of industry participants, the second half of 2013 holds significant promise as a potential ‘inflection point’ because a number of key infrastructure projects in the region are likely to see a kick-off towards the end of the year.
Key construction project initiatives such as the Etihad railway and Abu Dhabi airport expansion projects in the United Arab Emirates (UAE) as well as the Oman rail project are few of the many cited as potential growth drivers for PVC in the region in the next three to five years.
However, an uncertainty about the timely kick-off of several infrastructure projects amid the global slowdown has led to a near-term pessimistic outlook on the market.
“The PVC market in the Middle East is likely to be in a recovery mode, recording a marginal growth of 1.0-1.5% through the year, not more,” according to a regional trader based in the UAE.
Prices are expected to be more or less stable throughout 2013, but susceptible to trends and fluctuations in the US and Asian PVC markets, according to market participants.
($1 = €0.75)
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