Saudi Worries About China Netbacks

Business, China, Company Strategy, Economics, Middle East, Polyolefins, Projects

 

ChinaPE15May2012.png

 

By John Richardson

Here is the first of a three blog posts on what is happening in China’s polyolefins markets.

Today, we look at the Middle East and tomorrow and Thursday we present the perspective of traders and Western-headquartered polyolefin producers.

The series is in response to what we believe is a turning point. Last week’s steep price falls (polyethylene was down by $90-130/tonne and PP by $70-130/tonne, according to ICIS pricing) indicate that China faces far-deeper economic problems than some people believe. What applies to polyolefins also applies, as is often the case, to many other petrochemicals.

 

SAUDI ARABIAN polyethylene (PE) producers have been forced to cut offer prices twice in the last few weeks, in response to exceptionally weak Chinese demand, the blog has been told.

A few weeks ago, offers were cut substantially for May cargoes compared with April with a further smaller reduction made last week across most grades, says a source.

This suggests that Middle East producers in general may no longer be able to “hold the line” against the pressure for deep price reductions.

Naphtha-based competitors, as a result of the lower Saudi offers and a general decline in the market, have therefore gained no benefit from the fall in naphtha costs – the result of weaker crude.

But even in Saudi Arabia, with its unbeatable feedstock-cost position, producers are worried about netbacks.

Further concerns have been raised by the start-up, due by end-Q2, of the Saudi Polymers plant in Saudi Arabia. This comprises a 550,000 tonne/year high-density PE (HDPE) plants and a 440,000 tonne/year polypropylene (PP) facility.

QAPCO is expected to start-up its 300,000 tonne/year low-density PE (LDPE) in Qatar by the end of May.

Saudi Kayan Petrochemical Co’s 300,000 tonne/year LDPE is also due to come on-stream in Saudi Arabia in Q3, according to ICIS (as we shall discuss tomorrow, LDPE is in particularly bad shape).

The big debate in the Middle East, as is the case everywhere, is whether Chinese buyers will return in big numbers once they believe that pricing has bottomed out.

PREVIOUS POST

Asian Polyolefin Prices Tumble

13/05/2012

By John Richardson Asian polyethylene (PE) prices slumped by $90-130/tonne last ...

Learn more
NEXT POST

Demand Is The Thing

16/05/2012

By John Richardson In the second of a series of three blog posts, we gauge the r...

Learn more
More posts
Global polyethylene demand in 2020 could fall by 3.3m tonnes, cost curve analysis turned on its head
28/02/2020

By John Richardson NOTHING that’s happened over the last few days that should surprise anyone who ...

Read
Global PVC demand could fall by 1.1m tonnes as coronavirus crisis becomes global
26/02/2020

By John Richardson YOU CANNOT stimulate economic activity when factories and offices need to be shut...

Read
China polyethylene imports could be 3m tonnes lower as economy seizes up
24/02/2020

By John Richardson IT IS TIME for crisis planning, I am afraid, as a result of the World Health Orga...

Read
Rescue of major conglomerate, struggling SMEs raise risks for China and global economies
20/02/2020

The most important issue here remains the human cost of the coronavirus outbreak. My thoughts and ho...

Read
Global polyethylene demand in 2020 at risk of 2.4m decline because of coronavirus
19/02/2020

By John Richardson I AM a bit confused this morning following some excitement about the Chinese deci...

Read
Coronavirus: Global polypropylene demand in 2020 could fall by 2.6m tonnes over last year
17/02/2020

By John Richardson SOME GOOD news might be that official Chinese state media announced that the numb...

Read
Coronavirus threatens 2.9m tonnes of China PP demand as uncertainties increase
14/02/2020

By John Richardson THE RUMOURS travelled around my contacts, and I am sure many of your contacts, fo...

Read
More than 3m tonnes of Chinese polyethylene demand at risk from coronavirus
08/02/2020

    By John Richardson THE GOOD news is that medical experts believe the novel coronavirus...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more