SINGAPORE (ICIS)--Demand in the East Mediterranean (East Med) polyolefin markets remains weak, with soft offtakes likely to extend into August.At the Jaber-Nassib border between Jordan and Syria (Photo by ANDRE PAIN/EPA-EFE/Shutterstock)
Offers for August-loading cargoes are expected to emerge later this week.
Regional demand has been sluggish in recent years amid sluggish macroeconomic performance in Jordan, Lebanon and Syria.
Economic weakness has had a direct impact on consumption of finished goods, thereby affecting polyethylene (PE) and polypropylene (PP) packaging demand.
Jordan’s reliance on exports to Iraq and Syria continues to curb its demand for polymer resin.
Although both Syria and Iraq have seen relative political stability in the last two years, signs of economic growth have yet to emerge.
Jordan has also struggled with weak domestic resin demand, owing to some tough tax policies that its government has put in place in the last one year.
The country’s struggle with rising debt called for stricter tax norms, resulting in higher income taxes and removal of subsidies for staples including bread, fuel and electricity.
“Although initially met with protests, the implementation of this has resulted in reduced consumer spending on food and consumer goods through 2019. That has affected polyethylene and polypropylene demand,” a regional importer said.
Lebanon also continues to struggle economically as it has one of the largest public debts globally, which stands at around 140-150% of its GDP, according to industry reports.
Stricter measures have been put in place by the Lebanese government as part of a reformatory budget passed earlier this month.
This budget is expected to see new taxes and budgetary cuts, details for which are yet to be announced.
Tighter fiscal norms are likely to lead to reduced spending on essential goods and services, and have a direct bearing on PE and PP packaging demand in the months ahead.
In the more near-term, the upcoming Eid ul-Adha or the Muslim Festival of Sacrifice in August, and the summer holiday lull in the Middle East are expected to have an impact on uptake.
Summer holidays began in early July have largely capped demand for food and beverage packaging, since more people travel outside the region to avoid high daytime temperatures.
Construction activity is also lower in these months, resulting in lower PE and PP demand from this segment.
The week-long Eid ul-Adha holiday is expected to see a break in activities among processors in the region, leading to a shorter working month.
This is expected to further limit resin requirements for the month, leading processors to consider need-based purchases for August.
A seasonal uptick in offtake may emerge September onwards, as processors would re-stock inventories for the year-end holiday season.
Even so, any significant upsurge may be absent until the economic condition in the region’s markets improve.
Focus article by Veena Pathare