Mideast polymer makers wrestle for share in buyers’ market

Focus article by Muhamad Fadhil

DUBAI (ICIS)–Polymer producers in the Middle East have been aggressively cutting offers to keep existing customers and secure new ones in what is largely seen as a buyers’ market, industry sources said on Thursday.

Offers for high density polyethylene (HDPE) film were heard in the high-$1,200/tonne cost and freight (CFR) Gulf Cooperation Council (GCC) levels, while polypropylene (PP) raffia offers were quoted in the mid- to high-$1,100/tonne CFR GCC levels, according to Dubai-based traders.

Few deals were concluded at these prices.

On 16 January, HDPE film prices were assessed at $1,290-1,330/tonne CFR GCC while PP raffia was assessed at $1,190-1,250/tonne CFR GCC, according to ICIS.

“Producers are resorting to a simple tactic. Undercut competitors to win market share,” said a source close to a Saudi supplier.

Competition among Middle East suppliers heightened over the past few months as the continued plunge of crude values was dragging down polymers prices.

Producers are wary of losing loyal customers if they failed to match the low prices of their competitors, a UAE-based trader said.

Amid intense competition, plastic processors are able to pick and choose from which supplier to buy.

Notwithstanding sharp falls in polymer offers, the magnitude of the decline is still small compared with that of oil prices, according to buyers in the Middle East.

“The fall in polymer prices is so conservative. There is still room for a further correction. Oil fell by so much since the middle of last year,” a Saudi-based buyer said.

HDPE film prices in the GCC have shed 17% since July last year, while PP raffia prices fell by 22% over the same period, according to ICIS data.

Crude prices, on the other hand, have plunged by more than half since July 2014 on worries over a supply glut caused by an unexpectedly high US shale crude production and with major oil-exporting nations showing no inclination to cut output.

Middle East polymer prices are expected to be weighed down by oversupply concerns as UAE’s Borouge is ramping up production at the third phase of its expansion in Ruwais (Borouge 3).

“Let’s not forget the impact of Borouge 3. [The UAE producer] is expected to compete aggressively and will likely shake up the polymer market in the Middle East in 2015,” a GCC-based buyer said.

Borouge 3 will raise the company’s olefins and polyolefins capacity to around 4.5m tonnes/year from 2m tonnes/year currently. It comprises a 1.5m tonne/year ethane cracker and derivative plants, including HDPE and linear low density PE (LLDPE) units with a combined capacity of 1.08m tonnes/year; a 350,000 tonne/year low density PE (LDPE) unit; and two PP units with a combined capacity of 960,000 tonnes/year.

Other Middle East polymer producers include SABIC, Muntajat, LyondellBasell, Sipchem, Orpic, EQUATE and Tasnee, among others.

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