GCC Nov PE offers stable to soft; weak sentiment prevails

SINGAPORE (ICIS)–Initial offers for November-loading polyethylene (PE) cargoes in the Gulf Cooperation Council (GCC) were stable to soft on ample regional supply.

For high density PE (HDPE) film lots, some sellers have started offering $900/tonne on a delivered (DEL) basis, down by at least $40-50/tonne from the lowest-priced transaction seen for October.

Some other offers and selling indications for linear low density (LLDPE) film emerged at $900-1,000/tonne DEL GCC, unchanged from price levels for October shipments.

Offers from other producers have yet to emerge later this week amid weak market sentiment.

Container ships dock at the Dubai Port in the Jebel Ali free zone, UAE. (Photo by Kamran Jebreili/AP/Shutterstock)

Producers in the Middle East are under pressure to move volumes as global PE supply remains long, and they have started competing with US cargoes flowing into the region.

“Although bulk US-origin PE cargoes are yet to make a significant presence within the GCC, these have displaced Middle Eastern volumes in markets such as Turkey, Africa and southeast Asia, resulting in surplus availability with producers within the region,” a trader said.

US-origin HDPE blow-moulding cargoes have also begun flowing into the GCC market early this month in small quantities.

“PE trade in the GCC has traditionally been dominated by producers located within the region, due to the feedstock advantage that they have always had,” a UAE-based processor said.

Processors in the GCC have preferred regional product over imports from outside of the region. They even pay premiums on regional material taking into account secure delivery to their warehouses and shorter voyage period involved.

Furthermore, a good majority of regional trades are direct transactions between producers or their agents and downstream PE processors, with few traders involved.

This situation has begun to change in October as cheaper shale-based US cargoes became available.

A wide price gap between US export prices and those prevailing in the GCC prompted some regional traders to ramp up activity in the GCC.

These traders have begun to import US cargoes, store the product in warehouses in Jebel Ali in the UAE, and sell to processors on a delivered-to-warehouse basis.

US-origin HDPE blow moulding cargoes were sold to some regional processors at $900-905/tonne DEL GCC for October delivery.

HDPE blow moulding FOB US Gulf and DEL GCC prices

Even after accounting for the shipping, clearing and storage costs and trader margins, the price of US cargoes was $40-50/tonne lower than the lowest-priced regional product and $110/tonne lower than the highest-priced GCC cargo.

This wide difference in prices indicates that there is significant downward pressure on currently prevailing prices within the region, with US sellers set to ramp up exports further as destocking efforts emerge ahead of the end of the year.

A generally bearish buying sentiment also prevails toward the end the year, when buyers typically maintain lean stocks.

Demand for finished packaging goods within the region has also remained largely stagnant with many processors focused on growth outside of the region.

A number of processing units in the GCC have focused on catering to rising demand in other markets like Africa.

“Processors such as ourselves have put up additional units or added more lines, to cater to greater demand that has emerged from north African countries,” the UAE-based processor said.

“It is easy to expand processing capability within the region but demand growth from within is not really there,” he said.

Focus article by Veena Pathare