Focus'Wait and see' approach in African PE, PP markets

10 July 2013 17:46  [Source: ICIS news]

By Jo Pitches

LONDON (ICIS)--While high crude oil prices and logistical problems stemming from the unrest in Egypt have sparked some early buying of polyethylene (PE) and polypropylene (PP) in case conditions worsen, the overall feeling is of a wait and see” approach, participants said this week.

While the aforementioned factors are exerting upward pressure on prices, seasonal and cultural factors are working in the opposite direction, significantly dampening demand.

“There’s a wait and see” approach,” a distributor said. “I won't say there's no demand, but they're not booming. It’s lukewarm.”

A second distributor said: “[We’re] anticipating a slowdown. There’s Ramadan, the European holidays, logistical problems in the Middle East, an abundance of inventory. They'll [producers] try to move volumes.”

A producer of PE and PP said it has held prices steady since June as there is no incentive to raise them. “Demand is flat,” the source said. “In China, prices were revised down; Europe is not easy. You have to look at the whole picture. Africa is only a small part of the cake. We could start a long, quite stable, period now.”

The source added it has a realistic view of the market and is not a daydreamer.

The second distributor also emphasised the need to look at the global picture: “The US [market] is not doing great. The US doesn't care where it exports to. If Europe isn’t there [to export volumes to], it’ll go to Africa or China.”

The source added that the US market has temporarily been supported by Europe, but with demand poor and the summer holidays under way, this is no longer possible.

“Europe doesn't have strength to carry on [absorbing US volumes], and China is more and more self-sufficient,” the source said, implying that the African market could be the destination of choice for surplus US volumes.

By: Jo Pitches
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