Nigeria becomes Africa’s weakest PE, PP market on limited foreign currency

LONDON (ICIS)–Multiple west African polyethylene (PE) and polypropylene (PP) markets are struggling with a lack of foreign currency, and Nigeria has turned out to be the most affected.

Polymers demand could be healthier in these markets, sources said, but buyers are not being able to provide payments, with many now owing back payments on previous orders.

Nigeria is suffering from high stock levels, as well as low buying appetite.

“Nigeria is a catastrophe,” said a trader.

“For many people, it is the worst for many years.”

The situation will improve for Ghana and Ivory Coast following the sale of their cocoa harvests in December, which bring in large quantities of foreign currency.

The government for these countries set a price paid to farmers for cocoa crops, measured by weight.

Cocoa prices fell sharply last year, leading to a cut in price on fears of a supply glut, potentially exacerbating current currency issues.

A climb in global cocoa prices this year has resulted in an increase in Ivory Coast’s prices, although Ghana has kept its prices flat. The latter’s prices were already higher than Ivory Coast’s.

However, Nigeria’s cocoa harvest represents a much smaller part of its economic output, and the country will therefore lack the same sudden influx of foreign currency.

Polymers players have said this could mean the foreign currency crisis could continue into 2019.

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Global sentiment is poor, and falling crude prices are underlying a lack of buying interest.

Polymers prices are softening globally, affecting the current outlook in Africa as the region is dependent on imports.

Weakness is likely to continue into December, with many suppliers attempting to de-stock before the Christmas holiday period.

Demand is expected to drop off in the second half of December as a result.

Although some players keep predicting a floor to price drops, this has been repeatedly passed, and several sources said they expect further weakening.

However, some players said they are optimistic demand could pick up in 2019 across the region.

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PE is the most widely used plastic in the world, primarily found in packaging including plastic bags, plastic films and geomembranes.

PP is used for packaging, ropes, carpets, plastic parts, loudspeakers and automotive parts.

Pictured: Men testing sacks of cocoa for humidity in Ivory Coast; Africa’s polymers players are hopeful the cocoa harvest will bring in much-needed foreign currency
Source: Eye Ubiquitous/REX/Shutterstock 

Focus article by Ben Lake