Africa PE outlook uncertain on mixed signals

13 November 2013 17:01  [Source: ICIS news]

LONDON (ICIS)--The outlook for the African polyethylene (PE) market is uncertain because of a variety of factors exerting different influences on prices, sources said this week.

“A few customers expect a [price] drop next month,” a Middle East producer of high-density polyethylene (HDPE) said. “There’s some logic behind it, [lower] crude oil [prices], the exchange rate. But order books are good. There’s huge consumption in China and Asia”

Asia is deemed by many Middle East producers to be a more attractive selling destination than Africa, as logistical costs to Asia are lower.

Increased volumes sold to Asia would mean reduced availability for Africa. This could exert upward pressure on African prices.

According to a second Middle East producer, Africa prices could rise by $10-40/tonne (€7-30/tonne) in December because of a lack of supply in China and healthy demand there.

“Prices will go up even though it’s the holiday,” this source said. “It’s supply driven. China is a dark horse. “

Meanwhile, a distributor expects African prices to soften in December: “Demand is quite weak all across Africa. My gut feeling is that prices should reduce. I'll be surprised if prices go up, let's see.”

However, other market participants - producers and distributors - note the as-yet-unknown impact of the forthcoming increase in the European import duty.

From January the import duty for polymers from the GCC (Gulf Co-operation Council) area will be subject to a duty of 6.5% compared to the current level of 3%.

Whether this increase in duty will deter Middle East producers from selling to Europe – and looking to sell increased volumes to other regions such as Africa – remains to be seen.

“It depends on the impact of the import duty increase in Europe,” a third producer said. “It’s still not clear, we need to wait and see how this impacts demand and [trade] flows.”

By: Jo Pitches
+44 208 652 3214

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