Mideast PE, PP may bottom out as latest price cuts stir buying

Focus article by Muhamad Fadhil

DUBAI (ICIS)–Polymer prices in the Middle East may bottom out in the coming weeks, with the latest round of reduced offers managing to stir up some buying activities in the market, industry sources said on Friday.

Offers for February cargoes in the UAE declined by at least $100/tonne from January, while those in the domestic Saudi Arabian market were reduced by $150-200/tonne from the previous month, they said.

On 23 January, high density polyethylene (HDPE) film prices were assessed at $1,280-1,320/tonne CFR (cost and freight) GCC (Gulf Cooperation Council), while polypropylene (PP) raffia stood at $1,140-1,200/tonne CFR GCC, according to ICIS data.

The Middle East market should track the expected recovery in Asia, where polymer demand is seen to make a strong comeback in March after the week-long Lunar New Year holiday in China, market sources said.

China will be on holiday from 18-24 February for the Lunar New Year festivities.

“Demand could pick up in March once China returns from Chinese New Year. Prices may see a bottom in the coming weeks,” a Middle East polymer trader said.

Buying interest has somewhat resumed as market players widely acknowledge that regional polymer prices are nearing bottom.

Buoying up market sentiment are stable-to-firm prices of feedstocks ethylene and propylene in Asia, industry sources said.

At midday, ethylene prices were at $875-885/tonne CFR NE (northeast) Asia, while propylene prices stood at $820-840/tonne CFR NE Asia, according to ICIS data.

Industry players said they are finally sensing stability in the polymers market after enduring nearly six months of volatility. For buyers, this meant a return to the spot market to restock.

“We can now finally take positions,” said an East Mediterranean-based buyer.

February polymer offers in the Middle East were cut by at least 8% from January, in response to lower-priced offers in Asia and flagging Middle East demand, industry sources said.

Asia is expected to provide some positive signal as restocking activities will begin in the weeks leading to the Lunar New Year holiday in China, industry sources in the Middle East said.

The Lunar New Year, which is celebrated in most parts of northeast and southeast Asia, falls on 19 February.

Saudi Arabian producers sell polymers to Asia, mainly China and southeast Asia. They may be enticed to shift more volumes eastward should there be an aggressive restocking among Chinese converters, and thus lead to a tightening of supply in the Middle East that should support prices.

“When Chinese demand picks up, prices globally will increase,” a Dubai-based trader said.

China ranks among the top two biggest economies in the world and is a major market for polymers.

The expected pick-up in demand in the country, however, may be weaker compared with previous years as the Chinese economy has been slowing down for four straight years. In 2014, the economy expanded at its slowest pace in 24 years at 7.4%.

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