African market not conducive to PE price increases, say producers

25 June 2013 16:41  [Source: ICIS news]

LONDON (ICIS)--The majority of producers of polyethylene (PE) for the African markets are continuing to aim for July price rollovers, believing that market conditions do not support a price hike, they said this week.

However, one producer is still planning to increase its high-density polyethylene (HDPE) film prices by $30/tonne (€23/tonne) on June prices next month. A week ago, it justified the hike by saying that political instability in the Middle East would likely drive crude oil prices higher.

One of the PE producers rolling over its prices into July said: “A rollover is our target. All the companies [producers] will add $20-30/tonne but the time is not suitable for increases. Demand is down in Africa. Prices should be plus $20-30/tonne, but demand now is slow, so we decided to go for a rollover.”

A second PE producer said: “I’m surprised by price increases [from some producers] in July. Demand is need-based, it’s hand-to-mouth. There’s not much trading activity. We are keeping prices stable. There’s not much scope for prices to go up.”

“I don't expect to see price increases,” a distributor said. “It’s the European summer, Ramadan will be quiet. But that's how producers operate. A rollover will mean prices go down. [They]Aim high, [expecting to] get beaten down.”

There has already been some resistance from buyers to June price hikes of $30-50/tonne from May levels.

The rainy season in West Africa and the winter in eastern Africa are subduing demand, as is traditionally the case.

Furthermore there is said to be tough competition among producers for the east African market.

Even in North Africa, where producers had been most confident of pushing through June price hikes, demand has not been as good as expected.

The distributor said: “There’s a slowdown in business in North Africa, Morocco, demand is not picking up at all. Everybody is surprised why finished demand is so poor. They [producers] still have PE [available] for June.”

($1 = €0.76)

By: Jo Pitches
+44 208 652 3214

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