FocusS Africa PE, PP importers finding business conditions tough

03 July 2013 17:21  [Source: ICIS news]

By Jo Pitches

Outlook is bleakLONDON (ICIS)--A combination of a frequently fluctuating rand, poor demand, high prices and increased costs continues to make business difficult for importers of polyethylene (PE) and polypropylene (PP) to the South African market, participants said this week.

“There’s definitely not much demand,” a distributor said. “I haven't sold much at all. One customer [in Zambia] got a big order, that's all.”

A second distributor said: “We’ve not sold PE or PP. Only PET [polyethylene terephthalate].”

When asked whether high prices were deterring buyers or whether there was little demand regardless, the second distributor said: “A bit of both. Prices are too high, but then there’s little demand anyway.”

Local producers are expected to increase their prices in August.

“There’s no justification behind the increases,” the first distributor said. “There is an anticipation of the market turning. There should be an increase, producers think, buyers think otherwise.”

The source added: “Internationally, demand is not there. There’s a call for a big market correction. I think prices would [need to] be $70-100/tonne [€54-77/tonne] lower to stimulate buying for PE and PP. No one's willing to budge.

"We’ll see small increases or decreases going forward. [There’s] No demand but prices are high - something needs to give.”

Producers and distributors speak of higher costs.

The second distributor said: “There are increases in the cost of labour in South Africa due to strikes. In Zambia it's [increased labour costs] due to a new government.

"They upped minimum wages. [In South Africa there are] Fuel hikes, electricity [price] hikes. Costs are so high. People are really struggling to pass that on to consumers.”

The fluctuation of the exchange rate of the rand versus the US dollar is also a problem for importers.

“The exchange rate keeps fluctuating,” the first distributor said. “It’s difficult to predict market prices. Offers are one day to the next because of the fluctuating rand. We make an offer today and if it’s not taken, we redo it tomorrow.”

($1 = €0.77)

By: Jo Pitches
+44 208 652 3214

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