Higher crude may increase success of Africa PE, PP July price hikes

03 July 2013 17:49  [Source: ICIS news]

LONDON (ICIS)--Higher Brent crude oil prices stemming from the civil unrest in Egypt could increase the succcess of producers’ attempts to raise African polyethylene (PE) and polypropylene (PP) prices, a distributor said on Wednesday.

“This morning, my customer booked 160 tonnes of homo raffia at $1,600/tonne (€1,232/tonne) CFR (cost & freight) west Africa,” the source said. “This guy wasn't speaking to me last week [because prices were deemed high], but crude has gone up.”

The implication is that buyers may now fear PE and PP prices will increase further still, so they may be more likely to purchase now.

Producers of PE and PP for the African markets increased June prices by $30-50/tonne from May levels. While largely successful, there was some resistance from buyers because of lacklustre demand in much of Africa.

Last week many producers announced July price hikes of up to $40/tonne for PE and $30-50/tonne for PP as margins are squeezed because of high feedstock costs.

During the last fortnight these producers have cited the likelihood of crude oil price hikes because of the Middle East unrest as one of the reasons for increasing  prices.

At the time, there was little evidence of this impact on oil prices.

On Tuesday, there was talk of resistance from PE and PP buyers as July prices hikes were not thought justified.

The winter season in east Africa, the rainy season in west Africa and the completion of pre-Ramadan restocking in north Africa all mean that demand is subdued.

($1 = €0.77)


By: Jo Pitches
+44 208 652 3214

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