Mideast PE, PP sellers eye south Asia on weak China market

Focus article by Muhamad Fadhil

GUANGZHOU (ICIS)–Middle East polymer suppliers are more keen to sell to south Asia, where polyethylene (PE) and polypropylene (PP) prices are at least $80/tonne higher than in their key China market, industry sources said on Wednesday.

On 15 May, PP injection prices were assessed stable week on week at $1,280-1,300/tonne CFR (cost and freight) China, while high density polyethylene (HDPE) film prices fell by $20-30/tonne to $1,340-1,380/tonne CFR China, according to ICIS.

In south Asia, PP injection prices were assessed at $1,400-1,420/tonne CFR India and $1,400-1,430/tonne CFR Pakistan on 15 May, while HDPE film prices stood at $1,420-1,440/tonne CFR India and $1,440-1,460/tonne CFR Pakistan, according to ICIS.

Middle East producers are expected to announce their June offers to Asia starting next week amid concerns that the current weakness in China could spill over to other markets.

With backlog cargoes arriving in the trading hubs of Mumbai and Karachi after some delays, increased polymer availability is set to exert downward pressure on spot prices in these markets, industry sources said.

“Spot markets in Turkey, India and Indonesia are showing signs of weakness. Buyers are all asking why China is not buying enough polymer resins,” a major petrochemical supplier in the Middle East said.

An impasse on China’s polymer trades can also be also attributed to stable-to-soft feedstock prices in Asia, as well as sluggish demand for downstream plastic product.

At midday, ethylene prices stood at $1,370-1,400/tonne CFR NE Asia, while propylene prices were at $1,000-1,030/tonne CFR NE Asia, according to ICIS data.

Over the past three months, Chinese demand for PE and PP has been strong on the back of restocking activity while supply was tight due to production issues in Saudi Arabia in March and April, industry sources said.

PP injection and HDPE film prices have gained by more than $250/tonne over the past three months, after hitting their lowest levels this year in end-January, according to ICIS data.

On 30 January, PP injection prices stood at $950-1,000/tonne CFR China, while HDPE film was at $1,070-1,130/tonne CFR China, the data showed.

China, which is the world’s second-biggest economy, continues to show signs of weakness. The economy is expected to post a 2015 average GDP growth of 7% –  down from the 7.4 % pace recorded in 2014 and its weakest in 25 years.

The country’s economic expansion is expected to “decelerate” for the most of this year, leading to sluggish polymer demand, an Asian petrochemical source said.

“Polymer markets are sensitive to any changes in GDP. China will not rank highly in polymer growth this year,” the source said.

With the Chinese market at a standstill, polymer buyers in the Middle East and south Asia started having second thoughts about procuring cargoes, industry sources said.

“We are looking for signs from China. The market is without direction now,” according to a major Saudi PP producer.

Converters in Asia and Middle East often look to China, a major importer of both PE and PP, for price direction, particularly during periods of volatility.

Spot prices in Asian markets, such as India and Pakistan, will likely track price declines in China, should demand in the country weaken further, industry sources said.

Meanwhile, Middle East producers must also brace against China’s bid for self-sufficiency in chemicals, as more and more coal-to-olefins (CTO) and methanol-to-olefins (MTO) capacities are due to start production in the country in the near term, industry sources said.

“Middle East producers will just need to compete harder once CTO and MTO capacities hit the market,” a source close to a European producer said.

ICIS will be at the annual ChinaPlas exhibition – Asia’s biggest plastics trade fair – in Guangzhou from 20-23 May.

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