LONDON (ICIS)--Africa polymers players are optimistic for 2018 following a poor year for demand across the continent, although positive expectations are on the perception that the bottom has been reached rather than any real signs of improvement.
Africa will remain full of potential in the coming year, but it is likely to remain an opaque market for newcomers and veterans alike.
Polyethylene (PE) supply will become abundant in the coming year as delayed US expansions are finalised, whose completion was delayed following the damage caused by Hurricane Harvey.
There have also been capacity improvements at various plants in India, including significant new units at Reliance’s Jamnagar facility. The new facility now produces 950,000 tonnes/year of PE.
A company source has said that while the domestic market would absorb a good proportion of this, it would focus selling the excess on Africa and Asia.
US sellers have already begun offering competitive priced product in western Africa earlier in 2017 to establish market share.
This, in turn, dragged prices down as established sellers struggled to compete with the lower prices.
US volumes have mostly been contained in western Africa but their influence may spread out as US suppliers look to spread their influence further afield.
Western Africa is currently the most convenient entry point from the US.
Polypropylene (PP) has greater short-term chance of price increases, as the market is currently tightening across the world.
Africa is resisting due to large stocks and consistently weak demand and, with little new production coming online, the PP market may find itself facing repeated short-term shortages accompanying any supply disruptions.
Africa has proven surprisingly resistant to global PP trends this year, when prices remained subdued while every other region in the world was seeing significant hikes.
If Africa remains stubborn then it may find itself unable to compete with for allocations, a fact that was a worry for many participants in 2017. However, it has not developed into a supply problem.
Kenya should be a more consistent participant in the market following the political turmoil of its disputed general election.
Both the lead up to the vote and the dispute that followed have acted to dampen business levels in the country for most of 2017.
Kenya will also be moving into the New Year with its plastic bag ban in place, which will severely limit sales of PE film.
Elections will take place in various African countries in 2018, including a presidential election in Egypt and general elections in Sierra Leone and Cameroon, among many others.
None of the 2018 votes should be as disruptive as the Kenyan elections. The country is a major port for the East African region and one of the biggest economies on the continent.
Underlying problems remain that may continue to limit demand in key countries.
Egyptian players see more prospect in putting their money into high yield government bonds, while Nigeria repeatedly struggles with obtaining foreign currency.
There is also the aforementioned plastic bag ban in Kenya and those in other countries such Rwanda, Uganda and Senegal.
Many veterans of the African market would make the valid point that the market always has some sort of difficulty in many countries.
Therefore, it may be best not to focus on the granular single country issues but instead look at larger scale.
Normally, Africa looks towards Asia for influence so early performance in Asia may indicate the way for Africa in the following months.
By Ben Lake