Polymer trade weakens in Pakistan due to political crisis

Focus story by Muhamad Fadhil

MUMBAI (ICIS)–Polymer trade is weakening in Pakistan due to an escalating political crisis gripping the south Asian country, with most buyers taking a wait-and-see approach, industry sources said on Friday.

“We are seeing fewer sales from Pakistan because of the political situation. Buyers are all waiting on the sidelines,” according to a source close to a south Asian producer.

Pakistan’s Prime Minister Nawaz Sharif is facing serious pressure to resign from cricketer-turned-politician Imran Khan, who along with thousands of supporters, had besieged the parliament for the past three days.

Khan alleges the government was formed through election fraud, an accusation vehemently denied by Sharif.

Khan’s political march is indirectly supported by fiery cleric Tahir-ul Qadri, who led thousands of supporters as well outside the parliament.

Both separate but powerful rallies have remained peaceful so far. Nevertheless, the intensity and scale have led to speculations of a military coup in the country.

A landslide victory by Sharif’s party in May 2013 saw the country’s first ever handover of power from one civilian-led government to another after a full term.

“The protest movement is gaining credibility and this is concerning investors,” according to a south Asian polymer trader.

Deliveries from traders in Karachi to the key conversion hub of Lahore were slightly delayed because of the unrest.

“Initially, our deliveries were delayed but authorities are taking steps to address this,” according to a separate trader.

Due to the unrest, at least two producers lowered their polypropylene (PP) offers to spur buying.

“Producers are obviously concerned. So, they are lowering prices to entice end-users,” according to a south Asian polymer source.

An Indian supplier lowered PP raffia (flat yarn) by $5/tonne to $1,580/tonne CFR Pakistan, while a Saudi producer reduced prices by $5-10/tonne to $1,580/tonne CFR Pakistan for September shipments.

Despite the lower offers, buyers said they will continue to take a wait-and-see position as the Pakistani rupee is weakening.

“The crisis is negatively impacting buying sentiment and pushing the currency lower,” a south Asian trader active in Pakistan said.

According to Karachi-based brokerage house Shajar Capital, the Pakistani rupee lost approximately 2% against the dollar during the month of August as a result of “the incumbent political environment” and absence of rise in foreign exchange reserves of the country.

Karachi-based traders said they are concerned further unrest initiated by anti-government protestors could destabilise the currency further.

“We are worried more protests could happen. This can lead to a further depreciation of the rupee,” a Pakistani polymer trader said.

A weak rupee makes dollar-priced imports expensive for Pakistani buyers.

New offers for polyethylene (PE) in Pakistan are likely to be delayed as suppliers attempt to assess the security situation in the country, industry sources said.

New offers from the Middle East are typically released from the 20th of every month.

Pakistan imports most of its polymer requirements from south Asia and Middle East.

South Asian polymer suppliers selling into Pakistan include Reliance Industries Limited and Indian Oil.

Middle East producers active in the country include SABIC, Muntajat, Orpic and Tasnee, among others.

Additional reporting by Tahir Ikram

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