Tepid demand to temper Middle East polymer price gains

Focus story by Muhamad Fadhil

SINGAPORE (ICIS)–Polymer producers in the Middle East are expected to hike offers for August cargoes because of tight supply, but sluggish demand may limit any price gains for polyethylene (PE) and polypropylene (PP), industry sources said on Monday.

August offers are likely to be at least $20/tonne higher for most PE and PP grades compared with July levels, but buyers were hoping for a price roll-over, they said.

On 18 July, high density PE (HDPE) film prices were assessed at $1,560-1,590/tonne CFR (cost and freight) Gulf Cooperation Council (GCC), while linear low density PE (LLDPE) film prices were assessed at $1,600-1,630/tonne CFR GCC, according to ICIS.

PP raffia (flat yarn) prices stood at $1,530-1,590/tonne CFR GCC during the same assessment period, ICIS data showed.

New polymer offers from the Middle East typically emerge after the 25th of a given month, but upcoming holidays may prompt producers to announce their offers earlier.

Most market players in the region are expected to be mostly out in the last week of July for the Eid-ul-Fitr holiday, which marks the end of the Muslim fasting month of Ramadan.

“We may increase PE and PP prices. Supply is tight so buyers will need to pay more,” said a Saudi-based polymer supplier.

Spot availability of LLDPE and HDPE, in particular, is extremely limited as plants in the Middle East operate at reduced capacity during Ramadan.

“Supply remains an issue. Plants in the region operate reduced hours during Ramadan and suppliers often time their shutdowns during such a lull period,” a Dubai-based PE trader said.

But buyers can afford to wait on the sidelines should suppliers attempt to hike offers for August, market sources said.

“Nobody knows for sure what will happen after Eid-ul-Fitr. Supply is tight but demand is sluggish. Buyers may just take a wait-and-see approach should offers climb too high,” according to a Saudi-based supplier.

End-users are currently holding sufficient inventory, as they stocked up on the polymers when concerns about a possible tightening of supply was raised ahead of Ramadan.

“We’ve sufficient stocks to last through the holiday period. We bought a lot of material during the first two weeks of the fasting month,” according to a Middle East PP buyer.

Other buyers are keen to buy their minimum polymer requirements for August, citing the current high prices are “unsustainable” for their business.

There is little incentive to purchase material now as polymer shipments or deliveries are expected to be delayed, most likely to mid- or late August once port and custom officials return from the Eid-ul-Fitr holiday, according to buyers.

“Custom and port officials are already on leave, so shipments or deliveries will be late for sure,” a Saudi polymer buyer said.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections