West Africa PE,PP business struggles on soft crude prices

LONDON (ICIS)–Suppliers of polyethylene (PE) and polypropylene (PP) to the west African market are struggling to conduct business in light of the recent drop in crude oil prices and expectations of polymer prices falling further, participants said this week.

“[Polymer] Producers still have November volumes to sell, people are cancelling orders because they think prices will go down [further],” a distributor said. “My customers are backing out of deals. I can’t back out. Of five distributors [customers], maybe three will tell you this.”

The source said it is coping at present and not panicking.

“There is no price any more,” the distributor continued. “Prices are negotiated on a case by case basis. Some are done very secretly. It’s very opaque.  There’ll be further [price] decreases next month. “

Despite losing business, this source understands the view of its customers.

Long lead times to west Africa contribute to the problem.

“They [customers] bought material at $100/tonne higher [than it is now] and it’s only just been shipped. It takes forever for material to reach west Africa.  They see prices plummeting long before the material arrives.”

However, participants hoping to buy are taking advantage of the situation.

Another distributor covering this region said: “My expectations have partially been met [in terms of prices softening this month].  I have 1,500 tonnes [of polymers] to buy. I waited, I knew this month would be in for a kill, that prices would bottom out, and they have.”

This source named several producers it says have not yet sold their November allocations and are open to bids.