Middle East PP to remain stable as key sellers eye rollovers

SINGAPORE (ICIS)–Polypropylene (PP) prices in the Middle East are likely to emerge at a rollover when offers are announced later this week despite the continued tightness in supply.

PP resin (How Hwee Young/EPA/Shutterstock)

Prices for all PP homopolymer and copolymer grades are set to remain stable from April levels, as market players in the region prepare for the Muslim fasting month of Ramadan which begins in early May.

On 26 April, ICIS assessed PP raffia/injection prices in the GCC at $1,160-1,200/tonne DEL (delivered) GCC, stable from the previous week.

Prices for the same grades in the East Med were assessed at $1,110-1,190/tonne CFR (cost and freight) East Med, also unchanged from the week before, ICIS data showed.

Buyers in the Gulf Cooperation Council (GCC) and East Mediterranean (East Med) deem any possible hike in May prices as unlikely, owing to a seasonal slowdown in demand during Ramadan.

Ramadan traditionally sees shorter working hours, resulting in lower trade levels in the region.

Offtake in downstream markets is typically lower this month, as processing facilities also reducing operating rates during this period.

Demand in the region is hence set to remain soft in May, with business levels set to resume to normal after the Eid ul-Fitr holidays in June.

The Eid ul-Fitr holiday marks the end of Ramadan.

A persistently wide spread over prices in Asia is also likely to cap further gains in GCC prices.

“We are already paying a much higher price than those seen in most Asian markets, so it is difficult for buyers to accept a further hike in May offers,” a GCC-based PP processor said.

Key producers in the GCC also acknowledge the presence of high prevailing premiums in GCC as compared with many global markets.

Despite the similarity in freight rates from the Middle East to China, and those prevailing within the GCC, import prices to the latter have typically been higher.

“The netbacks realised in GCC have been higher than most other regions that we export to,” a source at one producer facility said.

This is primarily due to the fact that the GCC market operates like a monthly market, dominated by direct sales from producers to the processors, and fewer traders operate within the region.

Processors’ preferences to work with an approved set of suppliers also contributes to a price trend that is less prone to weekly fluctuations as seen in Asia.

Demand for PP resin in the GCC is likely to initially emerge at levels similar to April, as processors look to stock up inventories ahead of Ramadan but may soon taper off after inventories are replenished.

Availability of PP from producers in the Gulf Cooperation Council (GCC) has stayed tight since early 2019, following scheduled maintenance activities as well as unplanned outages at several facilities.

This, along with stronger Chinese demandhas lent support to firmer import prices in the recent weeks.

May prices to southeast Asia and India from the Middle East have also emerged firmer in the backdrop of curtailed availability, with the spread between dutiable and non-dutiable cargoes hitting an all-time low of $15/tonne earlier this month.

Even so, GCC-based market players appear certain of a price rollover for May and are keen to complete May purchases before Ramadan starts.

Over in the East Med, persistently weak demand in key markets such as Jordan and Iraq may cap price gains for May, in addition to the Ramadan lull.

Focus article by Veena Pathare