Africa PE, PP producers’ attempts to lift prices could be resisted

15 May 2013 13:44  [Source: ICIS news]

LONDON (ICIS)--Any attempts by polyethylene (PE) and polypropylene (PP) producers to increase June offer prices for African PE and PP could meet resistance, participants said this week.

“Buyers wouldn't accept an increase of $30-40/tonne [in June] unless there is a supply constraint, or problems,” a distributor said on Tuesday. “If supplies are normal, which most are, there's no real reason for an increase. [Looking at prices of] naphtha in Asia, and the cost of ethylene, they [PE/PP producers] can go down [drop prices] significantly!”

Many producers are targeting June price rises because of low inventories throughout the chain and increased buying interest in parts of Africa.

Demand in several African countries, particularly North Africa, has now returned. This is attributed to buyers holding low stocks, having held back from purchasing from mid-March on the expectation of both April and May offer prices falling.

combination of softer feedstock costs, lower PE prices in Asia, and poor demand in much of Africa saw producers reduce African PE prices by up to $100/tonne, depending on country and grade, during recent weeks.

Now, with prices expected to recover soon - the summer months traditionally see interest in PE, and prices, pick up - buyers are keen to restock.

Additionally, in Muslim countries, participants are keen to replenish stocks before Ramadan in July.

As a result, the majority of producers are targeting increases of $30-40/tonne for June.

“Crackers are making big money,” the distributor added. “They’re making money on feedstock prices. They [producers] can go down to $1,250/tonne or $1,260/tonne, they’re now at $1,540/tonne, $1,530/tonne. End-user demand is still not good.”

On Wednesday a trader said: “There was a rush on taking positions in the last week. Everyone had low stocks; everyone tried to cover short sales. I’m not sure if higher prices would be sustainable though, because fundamental demand is low.”

A second distributor said: “We heard sentiment is still weak in the market. A few producers from Korea tried to increase; they’ve not succeeded.”

By: Jo Pitches
+44 208 652 3214

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